<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED):
OCTOBER 18, 1999
GENZYME CORPORATION
(Exact name of registrant as specified in its charter)
MASSACHUSETTS 0-14680 06-1047163
(State or other jurisdiction of (Commission file (IRS employer
incorporation or organization) number) identification number)
ONE KENDALL SQUARE, CAMBRIDGE, MASSACHUSETTS 02139
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code:
(617) 252-7500
<PAGE>
ITEM 5. OTHER EVENTS.
On October 18, 1999, Genzyme Corporation, a Massachusetts corporation, and Cell
Genesys, Inc., a Delaware corporation, entered into an Agreement and Plan of
Merger pursuant to which the parties will effect a business combination through
a merger of Cell Genesys with and into a wholly-owned subsidiary of Genzyme.
The acquisition, which will be accounted for using the purchase method of
accounting, is expected to close in the first quarter of 2000.
Under the terms of the Agreement and Plan of Merger, upon consummation of the
merger, each outstanding share of Cell Genesys common stock will convert into
the right to receive a fraction of a share of Genzyme General Division common
stock equal to the exchange ratio. The exchange ratio will equal $10.00 divided
by the average of the per share closing prices of Genzyme General Division
common stock for the 20 trading days ending on the fifth trading day prior to
the closing, provided, that the exchange ratio will not be less than 0.1814 nor
greater than 0.3175. Each outstanding share of Cell Genesys Series B
Convertible Preferred Stock will convert into one share of a substantially
equivalent class of Genzyme preferred stock.
Consummation of the merger is subject to certain customary conditions,
including, among others, the adoption of the Agreement and Plan of Merger by the
Cell Genesys stockholders and the receipt of regulatory approvals.
The preceding description of the Agreement and Plan of Merger is qualified in
its entirety by reference to the copy included as Exhibit 99.1 hereto, which is
incorporated by reference herein.
The Board of Directors of Genzyme has allocated to Genzyme's Molecular Oncology
Division the Cell Genesys cancer programs and product candidates and $60 million
in cash. In exchange for these assets, approximately 12.5 million shares of
Genzyme Molecular Oncology Division common stock will be reserved as designated
shares for the benefit of Genzyme's General Division.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(c) EXHIBITS:
<TABLE>
<CAPTION>
Exhibit
No. Description
- ----- -----------
<S> <C>
99.1 Agreement and Plan of Merger, dated as of October 18, 1999,
between Genzyme Corporation and Cell Genesys, Inc. Filed
herewith.
</TABLE>
2
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
GENZYME CORPORATION
Dated: October 20, 1999 By: /s/ Michael Wyzga
------------------------------------------
Michael Wyzga, Senior Vice President
and Chief Financial Officer
3
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ----- -----------
<S> <C>
99.1 Agreement and Plan of Merger, dated as of October 18, 1999,
between Genzyme Corporation and Cell Genesys, Inc. Filed
herewith.
</TABLE>
<PAGE>
AGREEMENT AND PLAN OF MERGER
BETWEEN
GENZYME CORPORATION
AND CELL GENESYS, INC.
-----------------------------
Dated as of October 18, 1999
-----------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
SECTION 1 - THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
1.1 The Merger.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
1.2 Effective Time.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
1.3 Effects of the Merger. . . . . . . . . . . . . . . . . . . . . . . . . . .2
1.4 Articles of Organization and By-Laws.. . . . . . . . . . . . . . . . . . .2
1.5 Directors and Officers.. . . . . . . . . . . . . . . . . . . . . . . . . .2
1.6 Conversion of Common Stock . . . . . . . . . . . . . . . . . . . . . . . .2
1.7 CGI Options, Warrants and Purchase Rights. . . . . . . . . . . . . . . . .3
1.8 Conversion of Series B Convertible Preferred Stock . . . . . . . . . . . .4
1.9 Closing of CGI Transfer Books. . . . . . . . . . . . . . . . . . . . . . .4
1.10 Exchange of Certificates.. . . . . . . . . . . . . . . . . . . . . . . . .5
1.11 No Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
1.12 Lost Certificates. . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
1.13 Withholding Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
1.14 Distributions with Respect to Unexchanged Shares . . . . . . . . . . . . .6
1.15 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
1.16 Alternative Structure. . . . . . . . . . . . . . . . . . . . . . . . . . .6
SECTION 2 - REPRESENTATIONS AND WARRANTIES OF CGI. . . . . . . . . . . . . . . . . .7
2.1 Organization; Qualification; and Real Property . . . . . . . . . . . . . .7
2.2 Authority to Execute and Perform Agreements. . . . . . . . . . . . . . . .7
2.3 Capitalization and Title to Shares . . . . . . . . . . . . . . . . . . . .8
2.4 CGI Subsidiaries and CGI Joint Ventures. . . . . . . . . . . . . . . . . .9
2.5 SEC Reports. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.6 Financial Statements.. . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.7 Absence of Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . 10
2.8 Absence of Certain Changes.. . . . . . . . . . . . . . . . . . . . . . . 11
2.9 Absence of Questionable Payments . . . . . . . . . . . . . . . . . . . . 11
2.10 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.11 Actions and Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . 12
-i-
<PAGE>
<CAPTION>
TABLE OF CONTENTS
(CONTINUED)
PAGE
<S> <C>
2.12 Contracts and Other Agreements.. . . . . . . . . . . . . . . . . . . . . 12
2.13 Intellectual Property. . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.14 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.15 Year 2000 Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.16 Commercial Relationships . . . . . . . . . . . . . . . . . . . . . . . . 14
2.17 Tax Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.18 Employee Benefit Plans.. . . . . . . . . . . . . . . . . . . . . . . . . 16
2.19 Employee Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.20 Environmental Matters. . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.21 No Breach. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
2.22 Board Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
2.23 Anti-Takeover Laws.. . . . . . . . . . . . . . . . . . . . . . . . . . . 21
2.24 Rights Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
2.25 Opinion of CGI's Financial Advisor . . . . . . . . . . . . . . . . . . . 21
2.26 Brokerage. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
2.27 Investment Company Act . . . . . . . . . . . . . . . . . . . . . . . . . 21
2.28 Proxy Statement and Registration Statement . . . . . . . . . . . . . . . 21
SECTION 3 - REPRESENTATIONS AND WARRANTIES OF GENZYME. . . . . . . . . . . . . . . 22
3.1 Organization.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
3.2 Authority to Execute and Perform Agreement.. . . . . . . . . . . . . . . 22
3.3 Capitalization.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
3.4 SEC Reports. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.5 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.6 Absence of Undisclosed Genzyme Liabilities . . . . . . . . . . . . . . . 23
3.7 No Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . 24
3.8 Actions and Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . 24
3.9 No Breach. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.10 Intellectual Property. . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.11 Proxy Statement and Registration Statement . . . . . . . . . . . . . . . 25
-ii-
<PAGE>
<CAPTION>
TABLE OF CONTENTS
(CONTINUED)
PAGE
<S> <C>
3.12 Merger Sub . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 4 - COVENANTS AND AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . 26
4.1 Conduct of Business. . . . . . . . . . . . . . . . . . . . . . . . . . . 26
4.2 Corporate Examinations and Investigations. . . . . . . . . . . . . . . . 28
4.3 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
4.4 Authorization from Others. . . . . . . . . . . . . . . . . . . . . . . . 29
4.5 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
4.6 Preparation of Disclosure Documents. . . . . . . . . . . . . . . . . . . 29
4.7 Public Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . 30
4.8 Affiliate Letters. . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
4.9 Nasdaq Exchange Listings . . . . . . . . . . . . . . . . . . . . . . . . 30
4.10 No Solicitation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
4.11 Regulatory Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
4.12 Termination of 401(k) Plan . . . . . . . . . . . . . . . . . . . . . . . 32
4.13 Notification of Certain Matters. . . . . . . . . . . . . . . . . . . . . 32
4.14 Registration of Certain Shares . . . . . . . . . . . . . . . . . . . . . 32
4.15 Employee Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
4.16 Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
4.17 Sale of Abgnix Stock . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 5 - CONDITIONS PRECEDENT TO THE OBLIGATIONS OF EACH PARTY TO
CONSUMMATE THE MERGER. . . . . . . . . . . . . . . . . . . . . . . . . 33
5.1 Stockholder Approval . . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.2 Registration Statement . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.3 Absence of Order . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.4 Regulatory Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.5 HSR Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 6 - CONDITIONS PRECEDENT TO THE OBLIGATIONS OF GENZYME TO CONSUMMATE
THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
6.1 Representations, Warranties and Covenants. . . . . . . . . . . . . . . . 34
6.2 Corporate Certificates . . . . . . . . . . . . . . . . . . . . . . . . . 34
-iii-
<PAGE>
<CAPTION>
TABLE OF CONTENTS
(CONTINUED)
PAGE
<S> <C>
6.3 Secretary's Certificate. . . . . . . . . . . . . . . . . . . . . . . . . 34
6.4 Affiliate Letters. . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
6.5 Preferred Stock Approval . . . . . . . . . . . . . . . . . . . . . . . . 35
6.6 Tax Opinion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
6.7 Certificate of Merger. . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 7 - CONDITIONS PRECEDENT TO THE OBLIGATION OF CGI TO CONSUMMATE THE
MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
7.1 Representations, Warranties and Covenants. . . . . . . . . . . . . . . . 35
7.2 Tax Opinion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
7.3 Merger Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 8 - TERMINATION, AMENDMENT AND WAIVER. . . . . . . . . . . . . . . . . . . 36
8.1 Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
8.2 Effect of Termination. . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.3 Termination Fee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.4 Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.5 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 9 - MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
9.1 No Survival. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
9.2 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
9.3 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
9.4 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
9.5 Binding Effect; No Assignment; No Third-Party Beneficiaries. . . . . . . 39
9.6 Section Headings, Construction . . . . . . . . . . . . . . . . . . . . . 39
9.7 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
9.8 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
9.9 Submission to Jurisdiction; Waiver . . . . . . . . . . . . . . . . . . . 40
9.10 Enforcement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
9.11 Rules of Construction. . . . . . . . . . . . . . . . . . . . . . . . . . 40
</TABLE>
-iv-
<PAGE>
EXHIBITS
Exhibit A Form of Agreement of Joinder to be executed by Merger Sub
Exhibit B Form of Affiliate Letter
<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") dated as of
October 18, 1999 is between Genzyme Corporation ("Genzyme"), a Massachusetts
corporation, and Cell Genesys, Inc. ("CGI"), a Delaware corporation. The
parties wish to effect a business combination through a merger (the "Merger") of
CGI with and into a wholly-owned subsidiary of Genzyme to be formed as a
Massachusetts corporation ("Merger Sub") on the terms and conditions set forth
herein. For United States Federal income tax purposes, it is intended that the
Merger shall qualify as a reorganization under the provisions of Section 368(a)
of the Internal Revenue Code of 1986, as amended (the "Code"), and that this
Agreement constitute a plan of reorganization within the meaning of
Section 1.368-2(g) of the income tax regulations promulgated under the Code.
For financial accounting purposes, it is intended that the Merger will be
accounted for using the purchase method of accounting.
In consideration of the mutual representations, warranties and covenants
contained herein, the parties hereto agree as follows:
SECTION 1 - THE MERGER
1.1 THE MERGER.
(a) Upon the terms and subject to the conditions hereof, and in
accordance with the Business Corporation Law of The Commonwealth of
Massachusetts (the "MBCL") and the General Corporation Law of the State of
Delaware (the "DGCL"), CGI shall be merged with and into Merger Sub. The Merger
shall occur at the Effective Time (as defined herein). Following the Merger,
Merger Sub shall continue as the surviving corporation (sometimes referred
herein as the "Surviving Corporation") and the separate corporate existence of
CGI shall cease.
(b) Prior to the Effective Time, Genzyme shall cause Merger Sub to be
incorporated as a Massachusetts corporation, to adopt a charter and other
organizational documents as may be necessary or advisable and which shall be
appropriate for effecting the purposes of this Agreement, and to become a party
to this Agreement pursuant to an Agreement of Joinder substantially in the form
attached hereto as EXHIBIT A.
(c) The name of the Surviving Corporation shall be "Cell Genesys,
Inc." The purpose of the Surviving Corporation is to develop, manufacture and
sell human health care products and to engage generally in any business that may
lawfully be carried on by a corporation formed under Chapter 156B of the General
Laws of Massachusetts.
1.2 EFFECTIVE TIME. As soon as practicable after satisfaction or waiver
of all conditions to the Merger, the parties shall cause articles of merger (the
"Articles of Merger") with respect to the Merger to be filed and recorded in
accordance with Section 79 of the MBCL and a certificate of merger (the
"Certificate of Merger") with respect to the Merger to be filed and recorded in
accordance with the DGCL, and shall take all such further actions as may be
required by law to make the Merger effective. The Merger shall be effective at
such time as the Articles of Merger and the Certificate of Merger are duly filed
with the Secretary of The
<PAGE>
Commonwealth of Massachusetts and the Secretary of State of Delaware,
respectively, in accordance with the MBCL and the DGCL, or at such later time as
is specified in the Articles of Merger and the Certificate of Merger (the
"Effective Time"). Immediately prior to the filing of the Articles of Merger
and the Certificate of Merger, a closing (the "Closing") will be held at the
offices of Palmer & Dodge LLP, One Beacon Street, Boston, Massachusetts (or such
other place as the parties may agree) for the purpose of confirming the
foregoing. The date on which the Closing occurs is referred to herein as the
"Closing Date."
1.3 EFFECTS OF THE MERGER. The Merger shall have the effects set forth in
Sections 80 and 81 of the MBCL and Sections 259, 260 and 261 of the DGCL.
1.4 ARTICLES OF ORGANIZATION AND BY-LAWS. The Articles of Organization
and By-Laws of Merger Sub, in each case as in effect immediately prior to the
Effective Time, shall be the Articles of Organization and By-Laws of the
Surviving Corporation until thereafter changed as provided therein or by
applicable law.
1.5 DIRECTORS AND OFFICERS. The directors and officers of Merger Sub
immediately prior to the Effective Time shall be the directors and officers of
the Surviving Corporation, in each case, until the earlier of his or her
resignation or removal or otherwise ceasing to be a director or officer, as the
case may be, or until his or her respective successor is duly elected and
qualified.
1.6 CONVERSION OF COMMON STOCK
(a) At the Effective Time, by virtue of the Merger and without any
action on the part of Genzyme, CGI or Merger Sub:
(i) Subject to payment of cash in lieu of fractional shares as
provided in Section 1.6(a)(ii), each share of CGI common stock, $0.001 par value
per share ("CGI Common Stock") outstanding immediately prior to the Effective
Time, other than shares held by CGI or any CGI Subsidiary (as defined in
Section 2.4(a)), shall be cancelled and extinguished and automatically converted
into and become the right to receive a fraction of a share of Genzyme General
Division Common Stock, $0.01 par value per share ("GGD Stock") equal to the
Exchange Ratio (the "Common Stock Consideration"), and a corresponding
percentage of a GGD Stock Purchase Right (a "GGD Purchase Right") under
Genzyme's Amended and Restated Renewed Rights Agreement ("Genzyme's Rights
Plan"). The "Exchange Ratio" shall mean $10.00 divided by the GGD Share Price;
provided, however, that (A) if the GGD Share Price is greater than $55.13, then
the Exchange Ratio shall equal 0.1814 and (B) if the GGD Share Price is less
than $31.50 then the Exchange Ratio shall equal 0.3175. The "GGD Share Price"
shall mean the average (rounded to the nearest cent) of the per share closing
prices of GGD Stock as reported by the Nasdaq National Market (the "Nasdaq") for
the twenty trading days ending on the fifth trading day prior to the Closing
Date. Notwithstanding the foregoing, if within the period beginning on the date
hereof and ending on the Closing Date, there is a change in the number of issued
and outstanding shares of GGD Stock or CGI Common Stock as the result of a
reclassification, subdivision, recapitalization, stock split (including reverse
stock split) or stock dividend, the Exchange Ratio shall be equitably adjusted
to eliminate the effect of such event.
2
<PAGE>
(ii) No fractional shares of GGD Stock shall be issued pursuant
to this Agreement. In lieu of fractional shares, each stockholder who would
otherwise have been entitled to a fraction of a share of GGD Stock hereunder
(after aggregating all fractional shares to be received by such stockholder),
shall receive, without interest, an amount in cash (rounded to the nearest whole
cent) determined by multiplying such fraction by the per share closing price of
GGD Stock as reported by the Nasdaq on the trading day immediately preceding the
Effective Time.
(b) All shares of CGI Common Stock held at the Effective Time by CGI
or by a CGI Subsidiary shall be cancelled and extinguished and no payment shall
be made with respect thereto.
(c) Each share of common stock, $0.01 par value per share, of Merger
Sub issued and outstanding immediately prior to the Effective Time shall
continue to be outstanding following, and shall be unaffected by, the Merger.
1.7 CGI OPTIONS, WARRANTS AND PURCHASE RIGHTS
(a) At the Effective Time, each outstanding option to purchase shares
of CGI Common Stock (the "CGI Options") under CGI's 1989 Incentive Stock Option
Plan or CGI's 1998 Incentive Stock Option Plan (the "CGI Stock Option Plans"),
whether or not then exercisable, will be assumed by Genzyme. Each CGI Option so
assumed by Genzyme under this Agreement will continue to have, and be subject
to, the same terms and conditions set forth in the applicable CGI Stock Option
Plan immediately prior to the Effective Time (including, without limitation, any
repurchase rights), except that (i) each CGI Option will be exercisable (or will
become exercisable in accordance with its terms) for that number of shares of
GGD Stock equal to the product of the number of shares of CGI Common Stock that
were issuable upon exercise of such CGI Option immediately prior to the
Effective Time multiplied by the Exchange Ratio, rounded down to the nearest
whole number of shares of GGD Stock, and (ii) the per share exercise price for
the shares of GGD Stock issuable upon exercise of such assumed CGI Option will
be equal to the quotient determined by dividing the exercise price per share of
CGI Common Stock at which such CGI Option was exercisable immediately prior to
the Effective Time by the Exchange Ratio, rounded up to the nearest whole cent.
After the Effective Time, Genzyme will issue to each holder of an outstanding
CGI Option a notice describing the foregoing assumption of such CGI Options by
Genzyme. The adjustments provided herein with respect to any CGI Options which
are "incentive stock options" as defined in Section 422 of the Code shall be,
and are intended to be, effected in a manner which is consistent with Section
424(a) of the Code so as to preserve the benefits of such "incentive stock
options."
(b) At the Effective Time, each outstanding warrant (the "CGI
Warrants") to purchase shares of CGI Common Stock, whether or not then
exercisable, will be assumed by Genzyme. Each CGI Warrant so assumed by Genzyme
under this Agreement will continue to have, and be subject to, the same terms
and conditions set forth in the applicable CGI Warrant immediately prior to the
Effective Time (including, without limitation, any repurchase rights), except
that (i) each CGI Warrant will be exercisable (or will become exercisable in
accordance with its terms) for that number of shares of GGD Stock equal to the
product of the number of shares of CGI Common Stock that were issuable upon
exercise of such CGI Warrant
3
<PAGE>
immediately prior to the Effective Time multiplied by the Exchange Ratio,
rounded to the nearest whole number of shares of GGD Stock, and (ii) the per
share exercise price for the shares of GGD Stock issuable upon exercise of such
assumed CGI Warrant will be equal to the quotient determined by dividing the
exercise price per share of CGI Common Stock at which such CGI Common Warrant
was exercisable immediately prior to the Effective Time by the Exchange Ratio,
rounded to the nearest whole cent. After the Effective Time, Genzyme will issue
to each holder of an outstanding CGI Warrant a notice describing the foregoing
assumption of such CGI Warrant by Genzyme. CGI shall timely give to relevant
holders of CGI Warrants any notice required under the terms of such warrants to
terminate such warrants or to reduce the exercise period with respect to such
warrants in connection with the Merger.
(c) CGI shall amend its Amended 1992 Employee Stock Purchase Plan
(the "CGI Purchase Plan") so that as of the Effective Time (i) the CGI Purchase
Plan is terminated and (ii) rights of participants in the CGI Purchase Plan with
respect to any offering period then underway under the CGI Purchase Plan shall
be determined by treating the last business day prior to the Effective Time as
the last day of such offering period and by making such other pro-rata
adjustments as may be necessary to reflect the reduced offering period but
otherwise treating such offering period as a fully effective and completed
offering period for all purposes of such plan. Prior to the Effective Time, CGI
shall take all actions (including, if appropriate, amending the terms of the CGI
Purchase Plan) that are necessary to give effect to the transactions
contemplated by this Section 1.7(c).
1.8 CONVERSION OF SERIES B CONVERTIBLE PREFERRED STOCK.
(a) At the Effective Time, by virtue of the Merger and without any
action on the part of Genzyme or CGI, each outstanding share of CGI Series B
Convertible Preferred Stock, $0.001 par value per share ("CGI Series B
Convertible Preferred Stock"), other than (x) shares held by Genzyme, CGI or any
CGI Subsidiary which shall be cancelled and extinguished and no payment will be
made with respect thereto and (y) shares for which the holder thereof has
validly exercised redemption rights pursuant to the Certificate of Designations,
Preferences and Rights of Series B Convertible Preferred Stock, shall be
converted into the right to receive one share of preferred stock of Genzyme
("Genzyme Replacement Preferred Stock") having terms determined in accordance
with the Certificate of Designations, Preferences and Rights of Series B
Convertible Preferred Stock, as modified as may be necessary or appropriate such
that, in the reasonable judgment of Genzyme, Genzyme stockholder approval of the
transactions contemplated hereby is not required under the Marketplace Rules of
Nasdaq (or the rules of any exchange on which the GGD Stock is then quoted).
(b) At the Effective Time, each right to purchase an additional share
of CGI Series B Convertible Preferred Stock pursuant to the Securities Purchase
Agreement, dated November 13, 1997 (the "Securities Purchase Agreement"), shall
become the right to purchase a share of Genzyme Replacement Preferred Stock.
1.9 CLOSING OF CGI TRANSFER BOOKS. At the Effective Time, the stock
transfer books of CGI shall be closed and no further registration of transfers
of shares of CGI Common Stock or CGI Series B Convertible Preferred Stock shall
thereafter be made. On or after the Effective Time, any Certificates presented
to the Exchange Agent or Genzyme for any reason shall be
4
<PAGE>
converted into the right to receive the Common Stock Consideration with respect
to the shares of CGI Common Stock formerly represented thereby and any dividends
or other distributions to which the holders thereof are entitled pursuant to
Section 1.14. A "Certificate" is a stock certificate that immediately prior to
the Effective Time represented outstanding shares of CGI Common Stock that were
converted into the right to receive the Common Stock Consideration.
1.10 EXCHANGE OF CERTIFICATES. Genzyme shall authorize one or more persons
to act as Exchange Agent hereunder (the "Exchange Agent"). As soon as
practicable after the Effective Time, Genzyme shall cause the Exchange Agent to
mail, to all former holders of record of shares of CGI Common Stock that were
converted into the right to receive shares of GGD Stock pursuant to
Section 1.6(a)(i), instructions for surrendering their Certificates in exchange
for a certificate representing shares of GGD Stock (and the associated GGD
Purchase Right) and cash in lieu of fractional shares. Upon surrender of
Certificates for cancellation to the Exchange Agent, together with a letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss of, and title to, the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent) and other requested documents and in
accordance with the instructions thereon, the holder of such Certificates shall
be entitled to receive in exchange therefor (a) a certificate representing that
number of whole shares of GGD Stock into which the shares of CGI Common Stock
theretofore represented by the Certificates so surrendered shall have been
converted pursuant to the provisions of this Agreement and (b) a check in the
amount of any cash due pursuant to Section 1.6(a)(ii) or Section 1.14. No
interest will be paid or will accrue on any such amounts. Until surrendered in
accordance with the provisions of this Section 1.10, each Certificate shall
represent for all purposes only the right to receive Common Stock Consideration
and, if applicable, amounts under Section 1.14. Shares of GGD Stock into which
shares of CGI Common Stock shall be converted in the Merger at the Effective
Time shall be deemed to have been issued at the Effective Time. If any
certificates representing shares of GGD Stock are to be issued in a name other
than that in which the Certificate surrendered is registered, it shall be a
condition of such exchange that the person requesting such exchange shall
deliver to the Exchange Agent all documents necessary to evidence and effect
such transfer and shall pay to the Exchange Agent any transfer or other taxes
required by reason of the issuance of a certificate representing shares of GGD
Stock in a name other than that of the registered holder of the Certificate
surrendered, or establish to the satisfaction of he Exchange Agent that such tax
has been paid or is not applicable. Beginning the date which is six months
following the Closing Date, Genzyme shall act as the Exchange Agent and
thereafter any holder of an unsurrendered Certificate shall look solely to
Genzyme for any amounts to which such holder may be due, subject to applicable
law. Notwithstanding any other provisions of this Agreement, any portion of the
Common Stock Consideration remaining unclaimed five years after the Effective
Time (or such earlier date immediately prior to such time as such amounts would
otherwise escheat to, or become property of, any governmental entity) shall, to
the extent permitted by law, become the property of Genzyme free and clear of
any claims or interest of any person previously entitled thereto. To the extent
required, after the Effective Time, Genzyme will issue certificates representing
shares of Genzyme Replacement Preferred Stock upon surrender for cancellation of
certificates theretofore representing shares of Series B Convertible Preferred
Stock, together with other reasonably requested documentation in accordance with
the provisions set forth herein.
1.11 NO LIABILITY. Neither the Surviving Corporation nor the Exchange
Agent shall be liable to any person in respect of any shares (or dividends or
distributions with respect thereto) or
5
<PAGE>
cash payments delivered to a public official pursuant to any applicable escheat,
abandoned property or similar law.
1.12 LOST CERTIFICATES. If any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed and, if required by Genzyme,
the posting by such person of a bond in such reasonable amount as Genzyme may
direct as indemnity against any claim that may be made against it with respect
to such Certificate, the Exchange Agent will deliver in exchange for such lost,
stolen or destroyed Certificate, applicable certificates representing shares of
GGD Stock, cash in lieu of fractional shares and any amounts due pursuant to
Section 1.14.
1.13 WITHHOLDING RIGHTS. Genzyme shall be entitled to deduct and withhold
from the consideration otherwise payable pursuant to this Agreement to any
holder of shares of CGI Common Stock such amounts as it is required to deduct
and withhold with respect to the making of such payment under the Code, or any
provision of state, local or foreign tax law. To the extent that amounts are so
withheld by Genzyme, such withheld amounts shall be treated for all purposes of
this Agreement as having been paid to the holder of the shares of CGI Common
Stock in respect of which such deduction and withholding was made.
1.14 DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No dividend or
other distribution declared with respect to GGD Stock with a record date after
the Effective Time will be paid to holders of unsurrendered Certificates until
such holders surrender such Certificates. Upon the surrender of such
Certificates in accordance with Section 1.10, there shall be paid to such
holders, promptly after such surrender, the amount of dividends or other
distributions, without interest, declared with a record date after the Effective
Time and not paid because of the failure to surrender such Certificates for
exchange.
1.15 FURTHER ASSURANCES. At and after the Effective Time, the officers and
directors of the Surviving Corporation shall be authorized to execute and
deliver, in the name and on behalf of CGI, any deeds, bills of sale, assignments
or assurances and to take and do, in the name and on behalf of CGI, any other
actions and things to vest, perfect or confirm of record or otherwise in the
Surviving Corporation any and all right, title and interest in, to and under any
of the rights, properties or assets acquired or to be acquired by the Surviving
Corporation as a result of, or in connection with, the Merger.
1.16 ALTERNATIVE STRUCTURE. Notwithstanding anything to the contrary
contained in this Agreement, prior to the mailing of the Proxy
Statement/Prospectus (as defined in Section 4.6(a)), CGI shall be entitled to
revise the structure of the Merger as a direct merger of CGI with and into
Genzyme if CGI is advised by Wilson, Sonsini, Goodrich and Rosati, Professional
Corporation, that such restructuring is necessary for such firm to deliver the
opinion contemplated by Section 7.2; provided that (a) the revised structure, in
the opinion of Genzyme's counsel, will not subject Genzyme to adverse tax
consequences, change the consideration payable by Genzyme, or otherwise
adversely affect Genzyme, (b) the restructuring is not necessary due to CGI
violating a covenant contained herein and (c) if Palmer & Dodge LLP is willing
to provide the opinion contemplated by Section 7.2, an opinion from Palmer &
Dodge LLP will satisfy the condition in that Section, and CGI shall not be
entitled to revise the structure of the Merger pursuant to this Section. This
Agreement and any related documents shall be appropriately amended in order to
6
<PAGE>
reflect any such revised structure, including revisions reflecting the need for
any required vote by Genzyme stockholders.
SECTION 2 - REPRESENTATIONS AND WARRANTIES OF CGI
Except as set forth on the disclosure schedule delivered by CGI to Genzyme
on the date hereof (the "CGI Disclosure Schedule"), the section numbers of which
are numbered to correspond to the section numbers of this Agreement to which
they refer, CGI hereby makes the following representations and warranties to
Genzyme:
2.1 ORGANIZATION; QUALIFICATION; AND REAL PROPERTY
(a) Each of CGI, each CGI Subsidiary (as defined in Section 2.4(a))
and each CGI Joint Venture (as defined in Section 2.4(c)) is a corporation or
other legal entity duly organized, validly existing and in good standing under
the laws of its jurisdiction of organization and has corporate or similar power
and authority to own, lease and operate its assets and to carry on its business
as now being and as heretofore conducted. Each of CGI, each CGI Subsidiary and
each CGI Joint Venture is qualified or otherwise authorized to transact business
as a foreign corporation or other organization in all jurisdictions in which
such qualification or authorization is required by law, except for jurisdictions
in which the failure to be so qualified or authorized could not reasonably be
expected to have a material adverse effect on the assets, properties, business,
results of operations, financial condition or financial resources of CGI and the
CGI Subsidiaries, taken as a whole (a "CGI Material Adverse Effect"); provided,
however, (i) a decline in the market price of a share of CGI Common Stock,
(ii) litigation arising out of or resulting from the Merger or (iii) termination
or modification of contracts in accordance with their terms shall not be
considered a CGI Material Adverse Effect.
(b) CGI has previously made available to Genzyme true and complete
copies of the charter and bylaws or other organizational documents of CGI, each
CGI Subsidiary and each CGI Joint Venture as presently in effect, and none of
CGI, any CGI Subsidiary, or any CGI Joint Venture is in default in the
performance, observation or fulfillment of such documents, except, in the case
of CGI Subsidiaries and CGI Joint Ventures, such defaults that could not
reasonably be expected to have a CGI Material Adverse effect.
(c) CGI and the CGI Subsidiaries own no real property.
2.2 AUTHORITY TO EXECUTE AND PERFORM AGREEMENTS. CGI has the corporate
power and authority to enter into, execute and deliver this Agreement and,
subject, in the case of consummation of the Merger to the adoption of this
Agreement by the holders of CGI Common Stock, to perform fully its obligations
hereunder. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by the Board of
Directors of CGI. No other action on the part of CGI is necessary to consummate
the transactions contemplated hereby (other than adoption of this Agreement by
the holders of CGI Common Stock). This Agreement has been duly executed and
delivered by CGI and constitutes a valid and binding obligation of CGI,
enforceable in accordance with its terms.
7
<PAGE>
2.3 CAPITALIZATION AND TITLE TO SHARES
(a) CGI is authorized to issue 80,000,000 shares of CGI Common Stock,
of which 32,382,891 shares were issued and outstanding as of September 30, 1999.
All of the issued and outstanding shares of CGI's Common Stock are duly
authorized, validly issued, fully paid, nonassessable and free of pre-emptive
rights.
(b) CGI has reserved 4,816,563 shares of CGI Common Stock for
issuance pursuant to all of the CGI Options. CGI Options to purchase 3,902,371
shares of CGI Common Stock were outstanding as of September 30, 1999. SECTION
2.3(b) of the CGI Disclosure Schedule includes a true and complete list of all
CGI Options with vesting schedules and exercise prices. True and complete
copies of all instruments (or the forms of such instruments) referred to in this
section have been furnished previously to Genzyme. Except as indicated in
SECTION 2.3(b) of the CGI Disclosure Schedule, CGI is not obligated to
accelerate the vesting of any CGI Options as a result of the Merger.
(c) CGI has reserved 757,434 shares of CGI Common Stock for issuance
pursuant to all of the CGI Warrants. CGI Warrants to purchase 757,434 shares of
CGI Common Stock were outstanding as of September 30, 1999. SECTION 2.3(c) of
the CGI Disclosure Schedule includes a true and complete list of all outstanding
warrants with vesting schedules and exercise prices. True and complete copies
of all instruments (or the forms of such instruments) referred to in this
section have been furnished previously to Genzyme.
(d) CGI has reserved 105,987 shares of CGI Common Stock for future
issuance under the CGI Purchase Plan through January 31, 2000.
(e) CGI is authorized to issue 5,000,000 shares of Preferred Stock,
$0.001 par value per share ("CGI Preferred Stock"). CGI has designated (i)
200,000 of such shares as Series A Participating Preferred Stock, none of which
are issued and outstanding and all of which have been reserved for issuance
under CGI's Fourth Amended and Restated Rights Plan ("CGI Rights Plan"), and
(ii) 400,000 of such shares as Series B Convertible Preferred Stock, 694 of
which were issued and outstanding as of September 30, 1999. No other shares of
CGI Preferred Stock are outstanding. All of the issued and outstanding shares
of CGI Preferred Stock are duly authorized, validly issued, fully paid,
nonassessable and free of pre-emptive rights.
(f) Except (i) shares indicated as issued and outstanding on
September 30, 1999 in Section 2.3(a), and (ii) shares issued after September 30,
1999, upon (A) the exercise of outstanding CGI Options listed in SECTION 2.3(b)
of the CGI Disclosure Schedule, (B) the exercise of outstanding CGI Warrants
listed in SECTION 2.3(c) of the CGI Disclosure Schedule, (C) the exercise of
purchase rights in accordance with the CGI Purchase Plan and in an amount not in
excess of the number indicated as reserved for such purpose in Section 2.3(d)
and (D) the conversion of shares of CGI Series B Convertible Preferred Stock
indicated as issued and outstanding on September 30, 1999 in SECTION 2.3(e),
there are not as of the date hereof, and at the Effective Time there will not
be, any shares of CGI Common Stock issued and outstanding.
(g) CGI's authorized capital stock consists solely of the CGI Common
Stock described in Section 2.3(a) and the CGI Preferred Stock described in
Section 2.3(e). There are
8
<PAGE>
not as of the date hereof, and at the Effective Time there will not be,
authorized or outstanding any subscriptions, options, conversion or exchange
rights, warrants, repurchase or redemption agreements, or other agreements,
claims or commitments of any nature whatsoever obligating CGI to issue,
transfer, deliver or sell, or cause to be issued, transferred, delivered, sold,
repurchased or redeemed, additional shares of the capital stock or other
securities of CGI or obligating CGI to grant, extend or enter into any such
agreement, other than CGI Options listed in SECTION 2.3(b) of the CGI Disclosure
Schedule, CGI Warrants listed in SECTION 2.3(c) of the CGI Disclosure Schedule,
the shares of CGI Series B Convertible Preferred Stock described in Section
2.3(e), rights to purchase shares of CGI Common Stock pursuant to the CGI
Purchase Plan and rights to acquire up to 877 shares of CGI Series B Convertible
Preferred Stock pursuant to the Securities Purchase Agreement. To the best
knowledge of CGI, there are no stockholder agreements, voting trusts, proxies or
other agreements, instruments or understandings with respect to the voting of
the capital stock of CGI, except as set forth in SECTION 2.3(g) of the CGI
Disclosure Schedule.
(h) Neither CGI nor any CGI Subsidiary beneficially owns any shares
of capital stock of Genzyme.
(i) CGI has no outstanding bonds, debentures, notes or other
indebtedness which have the right to vote on any matters on which stockholders
may vote.
2.4 CGI SUBSIDIARIES AND CGI JOINT VENTURES
(a) SECTION 2.4(a) of the CGI Disclosure Schedule sets forth all of
the CGI Subsidiaries and the jurisdiction in which each is incorporated or
organized. Except as set forth in SECTION 2.4(a) of the CGI Disclosure
Schedule, all issued and outstanding shares or other equity interests of each
CGI Subsidiary are owned directly by CGI free and clear of any charges, liens,
encumbrances, security interests or adverse claims. As used in this Agreement,
"CGI Subsidiary" means any corporation, partnership or other organization,
whether incorporated or unincorporated, (i) of which CGI or any CGI Subsidiary
is a general partner or (ii) at least 50% of the securities or other interests
having voting power to elect a majority of the board of directors or others
performing similar functions with respect to such corporation, partnership or
other organization are directly or indirectly owned or controlled by CGI or by
any CGI Subsidiary, or by CGI and one or more CGI Subsidiary.
(b) There are not as of the date hereof, and at the Effective Time
there will not be, any subscriptions, options, conversion or exchange rights,
warrants, repurchase or redemption agreements, or other agreements, claims or
commitments of any nature whatsoever obligating any CGI Subsidiary to issue,
transfer, deliver or sell, or cause to be issued, transferred, delivered, sold,
repurchased or redeemed, shares of the capital stock or other securities of CGI
or any CGI Subsidiary or obligating CGI or any CGI Subsidiary to grant, extend
or enter into any such agreement. To the best of knowledge of CGI, there are no
stockholder agreements, voting trusts, proxies or other agreements, instruments
or understandings with respect to the voting of the capital stock of any CGI
Subsidiary.
(c) SECTION 2.4(c) of the CGI Disclosure Schedule sets forth, for
each CGI Joint Venture, the interest held by CGI and the jurisdiction in which
such CGI Joint Venture is
9
<PAGE>
organized. Except as set forth in SECTION 2.4(c) of the CGI Disclosure
Schedule, interests in CGI Joint Ventures held by CGI are held directly by CGI,
free and clear of any charges, liens, encumbrances, security interest or adverse
claims. The term "CGI Joint Venture" means any corporation or other entity
(including partnerships, limited liability companies and other business
associations) that is not a CGI Subsidiary and in which CGI or one or more CGI
Subsidiaries owns an equity interest (other than equity interests held for
passive investment purposes which are less than 10% of any class of the
outstanding voting securities or other equity of any such entity).
2.5 SEC REPORTS. CGI previously has delivered to Genzyme its (a) Annual
Report on Form 10-K for the year ended December 31, 1998 (the "CGI 10-K"), as
filed with the Securities and Exchange Commission (the "SEC"), (b) all proxy
statements relating to CGI's meetings of stockholders held or to be held after
December 31, 1998 and (c) all other documents filed by CGI with the SEC under
the Securities Exchange Act of 1934, as amended (the "Exchange Act") since
December 31, 1997. As of their respective dates, such documents complied, and
all documents filed by CGI with the SEC under the Exchange Act between the date
of this Agreement and the Closing Date will comply, in all material respects,
with applicable SEC requirements and did not, or in the case of documents filed
on or after the date hereof will not, contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading. Since December 31, 1997, CGI has timely filed, and
between the date of this Agreement and the Closing Date will timely file, with
the SEC all reports required to be filed by it under the Exchange Act. No CGI
Subsidiary is required to file any form, report or other document with the SEC.
2.6 FINANCIAL STATEMENTS. The consolidated financial statements
contained in the CGI 10-K and in CGI's quarterly report on Form 10-Q for the
quarter ended June 30, 1999 (the "CGI 10-Q") have been prepared from, and are in
accordance with, the books and records of CGI and present fairly, in all
material respects, the consolidated financial condition and results of
operations of CGI and the CGI Subsidiaries as of and for the periods presented
therein, all in conformity with generally accepted accounting principles applied
on a consistent basis, except as otherwise indicated therein and subject in the
case of the unaudited financial statements included in the CGI 10-Q to normal
year-end adjustments, which in the aggregate are not material, and the absence
of footnote disclosures.
2.7 ABSENCE OF UNDISCLOSED LIABILITIES. As at December 31, 1998, CGI and
the CGI Subsidiaries had no material liabilities of any nature, whether accrued,
absolute, contingent or otherwise (including without limitation, liabilities as
guarantor or otherwise with respect to obligations of others or liabilities for
taxes due or then accrued or to become due), required to be reflected or
disclosed in the balance sheet dated December 31, 1998 (or the notes thereto)
included in the CGI 10-K (the "CGI Balance Sheet") that were not adequately
reflected or reserved against on the CGI Balance Sheet. CGI has no material
liabilities of any nature, whether accrued, absolute, contingent or otherwise,
other than liabilities (a) adequately reflected or reserved against on the CGI
Balance Sheet, (b) reflected in CGI's unaudited balance sheet dated June 30,
1999, included in the CGI 10-Q, (c) included in SECTION 2.7 of the CGI
Disclosure Schedule or (d) incurred since June 30, 1999 in the ordinary course
of business consistent with past practice.
10
<PAGE>
2.8 ABSENCE OF CERTAIN CHANGES.
(a) Since June 30, 1999, there has not been any change, event or
circumstance, including the departure or expected departure of employees, that
has had, or is reasonably likely to have, a CGI Material Adverse Effect.
(b) Since June 30, 1999, except as disclosed in SECTION 2.8 of the
CGI Disclosure Schedule, there has not been any action taken by CGI or any CGI
Subsidiary during the period after June 30, 1999 through the date of this
Agreement that, if taken during the period from the date of this Agreement
through the Effective Time, would constitute a breach of Section 4.1.
2.9 ABSENCE OF QUESTIONABLE PAYMENTS. Neither CGI nor any CGI Subsidiary
nor, to the best of CGI's knowledge, any director, officer, agent, employee or
other person acting on behalf of CGI, or any CGI Subsidiary, has used any
corporate or other funds for unlawful contributions, payments, gifts, or
entertainment, or made any unlawful expenditures relating to political activity
to government officials or others, or established or maintained any unlawful or
unrecorded funds in violation of the Foreign Corrupt Practices Act of 1977, as
amended, or any other domestic or foreign law. Neither CGI nor any CGI
Subsidiary nor, to the best of CGI's knowledge, any director, officer, agent,
employee or other person acting on behalf of CGI or any CGI Subsidiary, has
accepted or received any unlawful contributions, payments, gifts or
expenditures.
2.10 COMPLIANCE WITH LAWS
(a) CGI and the CGI Subsidiaries have all licenses, permits,
franchises, orders or approvals of any federal, state, local or foreign
governmental or regulatory body material to the conduct of their businesses
(collectively, "Permits"); such Permits are in full force and effect; and no
proceeding is pending or, to the best knowledge of CGI, threatened to revoke or
limit any Permit.
(b) CGI and the CGI Subsidiaries are not in violation of and have no
liabilities, whether accrued, absolute, contingent or otherwise, under any
federal, state, local or foreign law, ordinance or regulation or any order,
judgment, injunction, decree or other requirement of any court, arbitrator or
governmental or regulatory body, relating to the operation of clinical testing
laboratories, labor and employment practices, health and safety, zoning,
pollution or protection of the environment, except for violations of or
liabilities under any of the foregoing which could not, in the aggregate,
reasonably be expected to have a CGI Material Adverse Effect.
(c) Each product or product candidate subject to the United States
Food and Drug Administration (the "FDA") jurisdiction under the Federal Food,
Drug and Cosmetic Act ("FDCA") that is manufactured, tested, distributed, held,
and/or marketed by CGI or any CGI Subsidiary is being manufactured, tested,
distributed, held and marketed in compliance with all applicable requirements
under the FDCA including, but not limited to, those relating to investigational
use, premarket clearance, good manufacturing practices, labeling, advertising,
record keeping, filing of reports and security.
11
<PAGE>
2.11 ACTIONS AND PROCEEDINGS. Except as set forth in SECTION 2.11 of the
CGI Disclosure Schedule, there are no outstanding orders, judgments,
injunctions, decrees or other requirements of any court, arbitrator or
governmental or regulatory body against CGI, any CGI Subsidiary, any CGI Joint
Venture or any of their assets or properties. Except as set forth in SECTION
2.11 of the CGI Disclosure Schedule, there are no actions, suits or claims or
legal, administrative or arbitration proceedings pending or, to the best
knowledge of CGI, threatened against CGI, any CGI Subsidiary, any CGI Joint
Venture or any of their securities, assets or properties. To the best knowledge
of CGI, there is no fact, event or circumstance now in existence that reasonably
could be expected to give rise to any action, suit, claim, proceeding or
investigation that, individually or in the aggregate, could be reasonably
expected to have a CGI Material Adverse Effect or interfere with CGI's ability
to consummate the transactions contemplated hereby.
2.12 CONTRACTS AND OTHER AGREEMENTS.
(a) Neither CGI nor any CGI Subsidiary is a party to or bound by, and
neither they nor their properties are subject to, any contract or other
agreement required to be disclosed in a Form 10-K, Form 10-Q or Form 8-K of the
SEC which is not disclosed in the CGI 10-K or the CGI 10-Q. All of such
contracts and other agreements and all of the contracts required to be set forth
in SECTION 2.12 of the CGI Disclosure Schedule are valid, subsisting, in full
force and effect, binding upon CGI or the applicable CGI Subsidiary, and, to the
best knowledge of CGI, binding upon the other parties thereto in accordance with
their terms, and CGI and the CGI Subsidiaries are not in default under any of
them, nor does any condition exist that with notice or lapse of time or both
would constitute a default thereunder.
(b) SECTION 2.12 of the CGI Disclosure Schedule sets forth a list of
the following contracts and other agreements to which CGI or any CGI Subsidiary
is a party or by or to which they or their assets or properties are bound or
subject:
(i) any agreement (A) involving research, development or the
license of Proprietary Rights (as defined in Section 2.13), (B) granting a right
of first refusal, or right of first offer or comparable right with respect to
Proprietary Rights, (C) relating to a joint venture, partnership or other
arrangement involving a sharing of profits, losses, costs or liabilities with
another person or entity, (D) providing for the payment or receipt by CGI or a
CGI Subsidiary of milestone payments or royalties, or (E) that individually
requires aggregate expenditures by CGI and/or any CGI Subsidiary in any one year
of more than $150,000;
(ii) any indenture, trust agreement, loan agreement or note
that involves or evidences outstanding indebtedness, obligations or liabilities
for borrowed money in excess of $150,000;
(iii) any agreement of surety, guarantee or indemnification that
involves potential obligations in excess of $150,000;
(iv) any agreement that limits or restricts CGI, any CGI
Subsidiary or any of their affiliates or successors in competing or engaging in
any line of business, in any geographic area or with any person;
12
<PAGE>
(v) any interest rate, equity or other swap or derivative
instrument; or
(vi) any agreement obligating CGI to register securities under
the Securities Act.
(c) To the best of CGI's knowledge, no executive officer or director
of CGI has (whether directly or indirectly through another entity in which such
person has a material interest, other than as the holder of less than 2% of a
class of securities of a publicly traded company) any material interest in any
property or assets of CGI (except as a stockholder) or a CGI Subsidiary, any
competitor, customer, supplier or agent of CGI or a CGI Subsidiary or any person
that is currently a party to any material contract or agreement with CGI or a
CGI Subsidiary.
2.13 INTELLECTUAL PROPERTY. CGI, the CGI Subsidiaries and the CGI Joint
Ventures own, or are licensed to use, or otherwise have the right to use all
patents, trademarks, service marks, trade names, trade secrets, franchises,
inventions, copyrights, and all other technology and intellectual property
(including, without limitation, biological materials), all registrations of any
of the foregoing, or applications therefor, and all grants and licenses or other
rights running to or from CGI, a CGI Subsidiary or a CGI Joint Venture relating
to any of the foregoing that are material to their businesses as presently
conducted, including those that are related to the gene activation technology
described in the CGI 10-K (collectively, the "Proprietary Rights"), subject to
out licenses listed on the CGI Disclosure Schedule. A list of all copyrights,
trademarks, servicemarks, tradenames, patents and patent applications held by
CGI or a CGI Subsidiary has been delivered previously to Genzyme and is included
in SECTION 2.13 of the CGI Disclosure Schedule. All patents, registered
trademarks and copyrights set forth on the list referred to above are valid and
subsisting. CGI is not aware of any basis for any claim by any third party that
the businesses of CGI, the CGI Subsidiaries or the CGI Joint Ventures infringe
upon the proprietary rights of others, nor has CGI, any CGI Subsidiary or, to
the best knowledge of CGI, any CGI Joint Venture received any written notice or
claim of infringement from any third party. CGI is not aware of any existing or
threatened infringement by any third party on, or any competing claim of right
to use or own any of, the Proprietary Rights. Except as disclosed in SECTION
2.13 of the CGI Disclosure Schedule, to the best of CGI's knowledge, CGI and the
CGI Subsidiaries have the unencumbered right to sell their products and services
(whether now offered for sale or under development) free from any royalty or
other financial obligations to third parties. To the best knowledge of CGI,
none of the activities of the employees of CGI or any CGI Subsidiary on behalf
of such entity violates any agreement or arrangement which any such employees
have with former employers. The policies and procedures of CGI and the CGI
Subsidiaries designed to establish and protect the Proprietary Rights are
described in SECTION 2.13 of the CGI Disclosure Schedule. To the best of CGI's
knowledge, all employees and consultants who contributed to the discovery or
development of any of the Proprietary Rights (other than Proprietary Rights
licensed to CGI or a CGI Subsidiary by any party other than a consultant to CGI
or CGI Subsidiary) did so either (a) within the scope of his or her employment
such that, in accordance with applicable law, all Proprietary Rights arising
therefrom became the exclusive property of CGI or the CGI Subsidiary or (b)
pursuant to written agreements assigning all Proprietary Rights arising
therefrom to CGI or the CGI Subsidiary.
13
<PAGE>
2.14 INSURANCE. SECTION 2.14 of the CGI Disclosure Schedule sets forth a
true and complete list of all policies or binders of fire, liability, product
liability, workmen's compensation, vehicular, directors' and officers' and other
insurance held by or on behalf of CGI and the CGI Subsidiaries. Such policies
and binders are in full force and effect, are reasonably believed to be adequate
for the businesses engaged in by CGI and the CGI Subsidiaries and are in
conformity with the requirements of all leases or other agreements to which CGI
or the relevant CGI Subsidiary is a party and, to the best knowledge of CGI, are
valid and enforceable in accordance with their terms. Neither CGI nor any CGI
Subsidiary is in default with respect to any provision contained in such policy
or binder nor has any of CGI or a CGI Subsidiary failed to give any notice or
present any claim under any such policy or binder in due and timely fashion.
There are no outstanding unpaid claims under any such policy or binder. Neither
CGI nor any CGI Subsidiary has received notice of cancellation or non-renewal of
any such policy or binder.
2.15 YEAR 2000 COMPLIANCE.
(a) Except as disclosed in SECTION 2.15 of the CGI Disclosure
Schedule, to the best of CGI's knowledge. all computer hardware, firmware,
software, systems, databases, devices, machinery, equipment and related items
(including embedded microcontrollers in non-computer equipment), embedded within
their products, and/or necessary for CGI and the CGI Subsidiaries to carry on
their businesses as presented conducted ("Systems") are Year 2000 Compliant.
For purposes of this Agreement, "Year 2000 Compliant" means, when used with
respect to Systems, that such Systems, whether used alone or in combination,
will correctly differentiate between years, in different centuries, and will
accurately process date/time data (including, where applicable, calculating,
comparing and sequencing) from, into and between the twentieth and twenty-first
centuries, including leap year calculations and unusual date situations, without
interruption.
(b) Schedule 2.15 of the CGI Disclosure Schedule sets forth (i) an
assessment of all Systems that could be adversely affected by a failure to be
Year 2000 Compliant on a timely basis and (ii) a plan and time line for becoming
Year 2000 Compliant. Based on such assessment, CGI estimates that the total
cost of rendering the Systems Year 2000 Compliant (exclusive of normal system
upgrades and replacements) will not be material.
2.16 COMMERCIAL RELATIONSHIPS. The relationships of CGI, the CGI
Subsidiaries and the CGI Joint Ventures with their collaborators and contract
manufacturers are generally good commercial working relationships. Except as
set forth in SECTION 2.16 of the CGI Disclosure Schedule, no such entity has
canceled or otherwise terminated its relationship with CGI, a CGI Subsidiary or
a CGI Joint Venture or has, during the last twelve months, materially altered
its relationship with CGI, a CGI Subsidiary or a CGI Joint Venture. Except as
set forth in SECTION 2.16 of the CGI Disclosure Schedule, CGI does not know of
any plan or intention of any such entity, and has not received any written
threat or notice from any such entity, to terminate, cancel or otherwise
materially and adversely modify its relationship with CGI, a CGI Subsidiary or a
CGI Joint Venture. Without limiting the generality of the foregoing, under
CGI's collaboration with Japan Tobacco Inc. ("JT") governed by the GVAX-TM-
Agreement (the "JT Agreement") by and between JT and CGI, effective as of
December 18, 1998, (a) CGI reasonably expects the Committed Funding Amount (as
such term is defined in the JT Agreement) in each of 2000 and
14
<PAGE>
2001 to be at least equal to the applicable amount set forth in the table in
Section 6.1.6(a) of the JT Agreement, (b) CGI reasonably expects to receive on
or about December 18, 1999 (or, if after December 20, 1999, has previously
received) a payment from JT equal to $2.5 million pursuant to Section 6.2.1 of
the JT Agreement and (c) JT has not terminated, has not indicated an intention
to terminate and has not proposed to materially modify the JT Agreement or any
part thereof.
2.17 TAX MATTERS
(a) For purposes of this Agreement, the term "Tax" (and, with
correlative meaning, "Taxes" and "Taxable") means all United States federal,
state, and local, and all foreign, income, profits, franchise, gross receipts,
payroll, transfer, sales, employment, use, property, excise, value added, ad
valorem, estimated, stamp, alternative or add-on minimum, recapture,
environmental, withholding and any other taxes, charges, duties, impositions or
assessments, together with all interest, penalties, and additions imposed on or
with respect to such amounts, including any liability for taxes of a predecessor
entity. "Tax Return" means any return, declaration, report, claim for refund,
or information return or statement filed or required to be filed with any taxing
authority in connection with the determination, assessment, collection or
imposition of any Taxes.
(b) All Tax Returns required to be filed on or before the date hereof
by or with respect to CGI and the CGI Subsidiaries have been filed within the
time and in the manner prescribed by law. All such Tax Returns are true,
correct and complete in all material respects, and all Taxes owed by CGI or the
CGI Subsidiaries, whether or not shown on any Tax Return, have been paid. CGI
and the CGI Subsidiaries file Tax Returns in all jurisdictions where they are
required to so file.
(c) There are no liens or other encumbrances with respect to Taxes
upon any of the assets or properties of CGI or the CGI Subsidiaries, other than
with respect to Taxes not yet due and payable.
(d) No audit is currently pending with respect to any Tax Return of
CGI or the CGI Subsidiaries, nor is CGI or its officers or directors aware of
any information which has caused or should cause them to believe that an audit
by any tax authority may be forthcoming. No deficiency for any Taxes has been
proposed in writing against CGI or the CGI Subsidiaries, which deficiency has
not been paid in full. No issue relating to CGI or the CGI Subsidiaries or
involving any Tax for which CGI or the CGI Subsidiaries might be liable has been
resolved in favor of any taxing authority in any audit or examination which, by
application of the same principles, could reasonably be expected to result in a
deficiency for Taxes of CGI or the CGI Subsidiaries for any subsequent period,
and neither CGI nor its officers or directors knows of any other basis for the
assertion of such a deficiency.
(e) There are no outstanding agreements, waivers or arrangements
extending the statutory period of limitation applicable to any claim for, or the
period for the collection or assessment of, Taxes due from or with respect to
CGI or the CGI Subsidiaries for any taxable period; no power of attorney granted
by or with respect to CGI or the CGI Subsidiaries relating to Taxes is currently
in force; and no extension of time for filing any Tax Return required to be
filed by or on behalf of CGI or any CGI Subsidiary is in force. CGI has made
available to
15
<PAGE>
Genzyme complete and correct copies of all income Tax Returns, audit reports and
statements of deficiencies for each of the last three taxable years filed by or
issued to or with respect to CGI or the CGI Subsidiaries.
(f) No consent to the application of Section 341(f)(2) of the Code
(or any predecessor provision) has been made or filed by or with respect to CGI
or the CGI Subsidiary or any of their assets or properties.
(g) CGI and the CGI Subsidiaries are not and have never been a party
to or bound by, nor do they have or have they ever had any obligation under, any
Tax sharing agreement or similar contract or arrangement. Neither CGI nor any
CGI Subsidiary has any liability for the Taxes of any other person under
Treasury Regulation 1.1502-6 (or any similar provision of state, local or
foreign law), as a transferee or successor, by contract, or otherwise.
(h) Except as set forth in the CGI Disclosure Schedule, there is no
contract or agreement, plan or arrangement obligating CGI or the CGI
Subsidiaries to make any payment that would not be deductible by reason of
Section 162(m) or 280G of the Code. Neither CGI nor any CGI Subsidiary has
agreed to, or is required to, make any adjustments under Section 481(a) of the
Code by reason of a change in accounting method or otherwise.
2.18 EMPLOYEE BENEFIT PLANS.
(a) SECTION 2.18 of the CGI Disclosure Schedule sets forth a complete
list of all pension, savings, profit sharing, retirement, deferred compensation,
employment, welfare, fringe benefit, insurance, short and long term disability,
incentive, bonus, stock, vacation pay, severance pay and similar plans, programs
or arrangements (the "Plans"), including without limitation all employee benefit
plans as defined in Section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA") maintained by CGI or the CGI Subsidiaries or to
which CGI or any of the CGI Subsidiaries are parties or required to contribute.
(b) CGI has delivered or made available to Genzyme current, accurate
and complete copies of (i) each Plan that has been reduced to writing and all
amendments thereto, (ii) a summary of the material terms of each Plan that has
not been reduced to writing, including all amendments thereto, (iii) the summary
plan description for each Plan subject to Title I of ERISA, and in the case of
each other Plan, any similar employee summary (including but not limited to any
employee handbook description), (iv) for each Plan intended to be qualified
under Section 401(a) or Section 501(c)(9) of the Code, the most recent
determination letter or exemption determination issued by the Internal Revenue
Service ("IRS"), (v) for each Plan with respect to which a Form 5500 series
annual report/return is required to be filed, the most recently filed such
annual report/return and annual report/return for the two preceding years,
together with all schedules and exhibits, (vi) all insurance contracts,
administrative services contracts, trust agreements, investment management
agreements or similar agreements maintained in connections with any Plan, (vii)
copies of any correspondence from the IRS, Department of Labor ("DOL") or other
U.S. government agency or department relating to an audit or an asserted or
assessed penalty with respect to a Plan or relating to requested relief from any
liability or penalty (including, but not limited to, any correspondence relating
to the IRS's EPCRS, APRSC, VCR, CAP or Walk-in CAP programs or the DOL's amnesty
programs for late
16
<PAGE>
filers and non-filers), (viii) for each Plan that is a defined benefit pension
plan, copies of the most recent actuarial valuation report and actuarial
valuation report for the three preceding years, (ix) for each Plan that is
intended to be qualified under Code Section 401(a), copies of compliance testing
results (nondiscrimination testing (401(a)(4), ADP, ACP, multiple use), 402(g),
415 and top-heavy tests) for the most recent plan year and three preceding plan
years, and (x) copies of COBRA and HIPPA forms and notices used for each Plan
that is a group health plan. No employee benefit handbook or similar employee
communication relating to any Plan nor any written communication of benefits
under such Plan describes the Plan in a manner materially inconsistent with the
documents and summary plan descriptions relating to such Plan that have been
delivered pursuant to the preceding sentence.
(c) There is no entity (other than CGI or any CGI Subsidiary) that
together with CGI or any CGI Subsidiary would be treated as a single-employer
within the meaning of Section 414(b), (c), (m) or (o) of the Code or Section
4001(b) of ERISA. Neither CGI nor any CGI Subsidiary has ever maintained,
contributed to or incurred any liability under any "multiemployer plan" as
defined in Section 4001(a)(3) of ERISA or a "multiple employer plan" as defined
in Section 413(c) of the Code. Neither CGI nor any CGI Subsidiary has incurred
any liability under Sections 4062, 4063 or 4201 of ERISA.
(d) Each Plan maintained by CGI or a CGI Subsidiary which is intended
to be qualified under either Section 401(a) or 501(c)(9) of the Code ("Qualified
Plans") is so qualified. Each Plan has been administered in all material
respects in accordance with the terms of such Plan and the provisions of any and
all statutes, orders or governmental rules or regulations, including without
limitation ERISA and the Code, and to the knowledge of CGI, nothing has been
done or not done with respect to any Plan that could result in any liability on
the part of CGI or any CGI Subsidiary under Title I of ERISA or Chapter 43 of
the Code. All reports, forms and notices required to be filed with respect to
each Plan, including without limitation Form 5500 series annual reports/returns
and PBGC Form 1s, have been timely filed. All contributions, premiums and other
amounts due to or in connection with each Plan under the terms of the Plan or
applicable law have been timely made, and provision has been made on the balance
sheet included in the CGI 10-Q for such contributions, premiums and other
amounts that were due as of the date of the balance sheet but were attributable
to service before such date.
(e) No "reportable event" as defined in Section 4043 of ERISA has
occurred with respect to any Plan subject to Title IV of ERISA. With respect to
each Plan subject to Title IV of ERISA, such Plan has no unfunded benefit
liabilities and such Plan could be terminated in a "standard termination" under
Section 4041(b) of ERISA on or before the Effective Time without any additional
contribution from any contributing employer (but disregarding any other
prerequisites for terminating such Plan). With respect to each Plan subject to
Section 412 of the Code, there is no accumulated funding deficiency (whether or
not waived) under such Plan.
(f) All claims for benefits incurred by employees on or before the
Closing Date are or will be fully covered by third-party insurance policies or
programs. Except for continuation of health coverage to the extent required
under Section 4980B of the Code or Section 601 et seq. of ERISA, other
applicable law or as otherwise set forth in this Agreement, there are no
obligations under any Plan providing benefits after termination of employment.
17
<PAGE>
(g) Neither CGI nor any CGI Subsidiary has contracted with any
"leased employee" within the meaning of Section 414 of the Code or any
"independent contractor".
(h) Except for individual employment agreements, each Plan can be
amended, modified or terminated without advanced notice to or consent by any
employee, former employee or beneficiary, except as required by law.
2.19 EMPLOYEE RELATIONS.
(a) CGI and the CGI Subsidiaries generally enjoy good
employer-employee relations. Except as indicated in SECTION 2.19 of the CGI
Disclosure Schedule, upon termination of the employment of any employees, none
of CGI, the CGI Subsidiaries nor Genzyme will be liable, by reason of the Merger
or anything done prior to the Effective Time, to any of such employees for
severance pay or any other payments (other than accrued salary, vacation or sick
pay in accordance with normal policies). True and complete information as to
all current directors, officers, employees or consultants of CGI and the CGI
Subsidiaries including, in each case, name, current job title and annual rate of
compensation has been made available previously to Genzyme.
(b) No work stoppage or labor strike against CGI or any CGI
Subsidiary is pending or threatened. Neither CGI nor any CGI Subsidiary is
involved in or, to the knowledge of CGI, threatened with, any labor dispute,
grievance, or litigation relating to labor, safety or discrimination matters
involving any employee, including without limitation charges of unfair labor
practices or discrimination complaints, that, if adversely determined, would
result in material liability to CGI. Neither CGI nor any CGI Subsidiary has
engaged in any unfair labor practices within the meaning of the National Labor
Relations Act that would, directly or indirectly result in material liability to
CGI. Neither CGI nor any CGI Subsidiary is presently, nor has it been in the
past, a party to or bound by any collective bargaining agreement or union
contract with respect to employees other than as set forth in SECTION 2.19 of
the CGI Disclosure Schedule and no collective bargaining agreement is being
negotiated by CGI or any CGI Subsidiary. No union organizing campaign or
activity with respect to non-union employees of CGI or any CGI Subsidiary is
ongoing, pending or, to the best knowledge of CGI, threatened.
2.20 ENVIRONMENTAL MATTERS
(a) Except as, individually or in the aggregate, could not reasonably
be expected to have a CGI Material Adverse Effect, (i) neither CGI nor any of
the CGI Subsidiaries has violated, is in violation of, or been notified that it
is in violation of, any Environmental Law, (ii) except in full compliance with
Environmental Laws, neither CGI nor any of the CGI Subsidiaries has generated,
used, handled, transported or stored any Hazardous Materials or shipped any
Hazardous Materials for treatment, storage or disposal at any other site or
facility; (iii) there has been no generation, use, handling, storage or disposal
of any Hazardous Materials in violation of any Environmental Law at any site
owned or operated by, or premises leased by, CGI or any of the CGI Subsidiaries
during the period of CGI's or such CGI Subsidiary's ownership, operation or
lease or, to the best of CGI's knowledge, prior thereto, nor has there been or
is there threatened any Release of any Environmental Contaminants into, on, at
or from any such site or premises, including without limitation into the ambient
air, groundwater, surface
18
<PAGE>
water, soils or subsurface strata, during such period or, to the best of CGI's
knowledge, prior thereto in violation of any Environmental Law or which created
or will create an obligation to report or respond in any way to such Release.
There is no underground storage tank or other container at any site owned or
operated by, or premises leased by, CGI or any CGI Subsidiary or, to the best of
CGI's knowledge, on any site formerly owned or operated by, or premises formerly
leased by, CGI or any CGI Subsidiary.
(b) Neither CGI nor any CGI Subsidiary has received notification in
any form that, and CGI has no knowledge that, any site currently or formerly
owned or operated by, or premises currently or formerly leased by, CGI or any
CGI Subsidiary is the subject of any federal, state or local civil, criminal or
administrative investigation evaluating whether, or alleging that, any action is
necessary to respond to a Release or a threatened Release of any Environmental
Contaminant. No such site or premises is listed, or to CGI's knowledge,
proposed for listing, on the National Priorities List or the Comprehensive
Environmental Response, Compensation, and Liability Information System, both as
provided under the federal Comprehensive Environmental Response, Compensation
and Liability Act ("CERCLA"), or any comparable state or local governmental
lists. Neither CGI nor any CGI Subsidiary has received written notification of,
and CGI has no knowledge of, any potential responsibility of CGI or any CGI
Subsidiary pursuant to the provisions of (i) CERCLA, (ii) any similar Federal,
state, local or other Environmental Law, or (iii) any order issued pursuant to
the provisions of any such Environmental Law with respect to Environmental
Contaminants used, manufactured, generated, stored, or treated at, transported
from, or disposed of on, any site currently or formerly owned or operated by, or
premises currently or formerly leased by, CGI or any CGI Subsidiary.
(c) CGI and the CGI Subsidiaries have obtained all permits required
by Environmental Law necessary to enable them to conduct their respective
businesses and are in compliance with all material aspects of said permits.
(d) There is no environmental or health and safety matter that
reasonably could be expected to have a CGI Material Adverse Effect. CGI
previously has furnished to Genzyme copies of any and all environmental audits
or risk assessments, site assessments, documentation regarding off-site disposal
of Hazardous Materials or Release of Environmental Contaminant, spill control
plans and all other material correspondence, documents or communications with
any governmental agency or other entity regarding the foregoing.
(e) For purposes of this Agreement:
(i) "Environmental Laws" means any Federal, state, local or
foreign laws (including common law), regulations, codes, rules, orders,
ordinances, permits, requirements and final governmental determinations
pertaining to the environment, pollution or protection of human health, safety
or the environment, as adopted or in effect in the jurisdictions in which the
applicable site or premises are located, including without limitation: the
Comprehensive Environmental Response Compensation and Liability Act of 1980, as
amended by the Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C.
Section 9601 et seq.; the Emergency Planning and Community Right-to-Know Act, 42
U.S.C. Section 11001 et seq.; the Resource Conservation and Recovery Act, 42
U.S.C. Section 6901 et seq.; the Federal Water Pollution Control Act, 33 U.S.C.
Section 1251 et seq.; the Federal Insecticide, Fungicide and Rodenticide Act, 7
19
<PAGE>
U.S.C. Section 136 et seq.; the Toxic Substance Control Act, 15 U.S.C. Section
2601 et seq.; the Oil Pollution Act of 1990, 33 U.S.C. Section 1001 et seq.;
the Hazardous Materials Transportation Act, as amended, 49 U.S.C. Section 1801
et seq.; the Atomic Energy Act, as amended 42 U.S.C. Section 2011 et seq.; the
Occupational Safety and Health Act, as amended, 29 U.S.C. Section 651 et seq.;
the Federal Food, Drug and Cosmetic Act, as amended 21 U.S.C. Section 301 et
seq. (insofar as it regulates employee exposure to Hazardous Substances), and
any state or local statute of similar effect; and including without limitation
any laws relating to protection of safety, health or the environment which
regulate the use of biological agents or substances including medical or
infectious wastes as any such laws have been amended;
(ii) "Environmental Contaminant" means Hazardous Materials, or
any other pollutants, contaminants, toxic or constituent substances or waste
radioactive substances, materials or special wastes, petroleum or petroleum
products, polychlorinated bi-phenals, asbestos containing materials, or any
other substance or material, in each case regulated by applicable Environmental
Laws;
(iii) "Hazardous Materials" means (A) any chemicals, materials
or substances defined as or included in the definition of "hazardous
substances," "hazardous wastes," "hazardous materials," "extremely hazardous
wastes," "restricted hazardous wastes," "toxic substances," "toxic pollutants,"
"hazardous air pollutants," "contaminants," "toxic chemicals," "toxics,"
"hazardous chemicals," "extremely hazardous substances," "pesticides," "oil" or
related materials as defined in any applicable Environmental Law, or (B) any
petroleum or petroleum products, oil, natural or synthetic gas, radioactive
materials, asbestos-containing materials, urea formaldehyde foam insulation,
radon, and any other substance defined or designated as hazardous, toxic or
harmful to human health, safety or the environment under any Environmental Law;
and
(iv) "Release" has the meaning specified in CERCLA.
2.21 NO BREACH. Except for (a) filings with the SEC under the Exchange
Act, (b) the filing of the Articles of Merger with the Secretary of The
Commonwealth of Massachusetts, (c) the filing of the Certificate of Merger with
the Secretary of State of Delaware, (d) the filing of a Notification and Report
Form under the Hart-Scott-Rodino Antitrust Improvements Act, as amended (the
"HSR Act") and (e) matters listed in SECTION 2.21 of the CGI Disclosure
Schedule, the execution, delivery and performance of this Agreement by CGI and
the consummation by CGI of the transactions contemplated hereby will not (i)
violate any provision of the Certificate of Incorporation or By-Laws of CGI,
(ii) violate, conflict with or result in the breach of any of the terms or
conditions of, result in modification of, or otherwise give any other
contracting party the right to terminate, accelerate obligations under or
receive payment under or constitute (or with notice or lapse of time or both
constitute) a default under, any instrument, contract or other agreement to
which CGI, any CGI Subsidiary or any CGI Joint Venture is a party or to which
any of them or any of their assets or properties is bound or subject, (iii)
violate any law, ordinance or regulation or any order, judgment, injunction,
decree or other requirement of any court, arbitrator or governmental or
regulatory body applicable to CGI or the CGI Subsidiaries or by which any of
CGI's or the CGI Subsidiaries' assets or properties is bound, (iv) violate any
Permit, (v) require any filing with, notice to, or permit, consent or approval
of, any governmental or regulatory body or (vi) result in the creation of any
lien or other encumbrance on the assets or
20
<PAGE>
properties of CGI or a CGI Subsidiary, excluding from the foregoing clauses
(iii), (iv), (v) and (vi) violations, breaches and defaults which, and filings,
notices, permits, consents and approvals the absence of which, in the aggregate,
could not reasonably be expected to have a CGI Material Adverse Effect or
interfere with the ability of CGI to consummate the transactions contemplated
hereby.
2.22 BOARD APPROVAL. The Board of Directors of CGI, as of the date of this
Agreement, has determined (a) that the Merger is fair to, and in the best
interests of, CGI and its stockholders, (b) to propose this Agreement for
adoption by CGI's stockholders and to declare the advisability of this
Agreement, and (c) to recommend that the stockholders of CGI adopt this
Agreement.
2.23 ANTI-TAKEOVER LAWS. CGI has taken all action necessary such that no
"fair price," "control share acquisition," "business combination" or similar
statute (including Section 203 of the DGCL) will apply to the execution,
delivery or performance of this Agreement.
2.24 RIGHTS AGREEMENT. The Board of Directors has approved an amendment
(the "Rights Amendment") to the CGI Rights Plan so as to provide that (a)
Genzyme will not become an "Acquiring Person," (b) no "Shares Acquisition Date"
or "Distribution Date" (as such terms are defined in the CGI Rights Plan) will
occur as a result of the approval, execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby, and (c) the Rights (as
defined in the CGI Rights Plan) will terminate immediately prior to the
Effective Time. Promptly following the execution and delivery of this
Agreement, CGI shall take all action necessary to make the Rights Amendment
effective.
2.25 OPINION OF CGI'S FINANCIAL ADVISOR. CGI has received the opinion of
Goldman, Sachs & Co., dated the date of this Agreement, to the effect that, as
of such date, the Exchange Ratio is fair, from a financial point of view, to the
holders of CGI Common Stock, a copy of which opinion has been made available to
Genzyme.
2.26 BROKERAGE. Other than Goldman, Sachs & Co., no broker, finder, agent
or similar intermediary has acted on behalf of CGI in connection with this
Agreement or the transactions contemplated hereby, and there are no brokerage
commissions, finders' fees or similar fees or commissions payable in connection
herewith based on any agreement, arrangement or understanding with CGI, or any
action taken by CGI. CGI previously has provided Genzyme with a copy of
Goldman, Sachs & Co.'s engagement letter.
2.27 INVESTMENT COMPANY ACT. Neither CGI nor any CGI Subsidiary is an
"Investment Company" within the meaning of such term under the Investment
Company Act of 1940.
2.28 PROXY STATEMENT AND REGISTRATION STATEMENT. None of the information
supplied or to be supplied by CGI for inclusion or incorporation by reference in
the registration statement on Form S-4 to be filed with the SEC in connection
with the issuance of shares of GGD Stock and shares of Genzyme Replacement
Preferred Stock in the Merger (the "Registration Statement") will, at the time
the Registration Statement is filed with the SEC, at any time it is amended or
supplemented or at the time it becomes effective under the Securities Act,
contain any untrue
21
<PAGE>
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading. None
of the information supplied or to be supplied by CGI for inclusion or
incorporation by reference in the proxy statement/prospectus included in the
Registration Statement (the "Proxy Statement/Prospectus"), on the date it is
first mailed to holders of CGI Common Stock or at the time of the CGI
Stockholders Meeting (as defined in Section 4.6(b)), will contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. The Proxy
Statement/Prospectus will comply as to form in all material respects with the
requirements of the Exchange Act and the Securities Act and the rules and
regulations of the SEC thereunder.
SECTION 3 - REPRESENTATIONS AND WARRANTIES OF GENZYME
Genzyme hereby makes the following representations and warranties to CGI:
3.1 ORGANIZATION. Each of Genzyme and each Genzyme Subsidiary is a
corporation or other legal entity duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization and has corporate or
similar power and authority to own, lease and operate its assets and to carry on
its business as now being and as heretofore conducted. Each of Genzyme and each
Genzyme Subsidiary is qualified or otherwise authorized to transact business as
a foreign corporation or other organization in all jurisdictions in which such
qualification or authorization is required by law, except for jurisdictions in
which the failure to be so qualified or authorized could not reasonably be
expected to have a material adverse effect on the assets, properties, business,
results of operations or financial condition of Genzyme and Genzyme
Subsidiaries, taken as a whole (a "Genzyme Material Adverse Effect"); provided,
however, that (i) a decline in the GGD Share Price or (ii) litigation arising
out of or resulting from the Merger shall not be considered a Genzyme Material
Adverse Effect. As used in this Agreement, "Genzyme Subsidiary" means any
"significant subsidiary" of Genzyme, as such term is defined in Rule 1-02(w) of
Regulation S-X under the Exchange Act, other than Genzyme Transgenics
Corporation.
3.2 AUTHORITY TO EXECUTE AND PERFORM AGREEMENT. Genzyme has the corporate
power and authority to enter into, execute and deliver this Agreement and to
perform fully its obligations hereunder. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have been
duly authorized by all necessary corporate action on the part of Genzyme. This
Agreement has been duly executed and delivered by Genzyme and constitutes its
valid and binding obligation, enforceable in accordance with its terms.
3.3 CAPITALIZATION. The authorized capital stock of Genzyme consists of
390,000,000 shares of common stock ("Genzyme Common Stock") and 10,000,000
shares of preferred stock, $0.01 par value per share ("Genzyme Preferred
Stock"). Of the Genzyme Common Stock, as of the date of this Agreement,
200,000,000 shares have been designated GGD Stock, 40,000,000 shares have been
designated Tissue Repair Division Common Stock, $0.01 par value per share ("GTR
Stock"), 40,000,000 have been designated Molecular Oncology Division Common
Stock, $0.01 par value per share ("GMO Stock"), 60,000,000 shares have been
designated Surgical Products Division Common Stock, $0.01 par value per share
("GSP Stock") and 50,000,000
22
<PAGE>
shares have been undesignated as to series. As of July 31, 1999, 83,362,170
shares of GGD Stock were issued and outstanding, 23,541,737 shares of GTR Stock
were issued and outstanding, 12,677,390 shares of GMO Stock were issued and
outstanding, and 14,835,161 shares of GSP Stock were issued and outstanding. As
of the date of this Agreement, no shares of Genzyme's Preferred Stock are
outstanding. Of the Genzyme Preferred Stock, as of the date of this Agreement,
2,000,000, 400,000, 400,000 and 600,000 shares have been designated as Series A
Junior Participating Preferred Stock, Series B Junior Participating Preferred
Stock, Series C Junior Participating Preferred Stock and Series D Junior
Participating Preferred Stock, respectively, and reserved for issuance under
Genzyme's Rights Plan. All issued and outstanding shares of GGD Stock, GTR
Stock, GMO Stock and GSP Stock are validly issued, fully paid, non-assessable
and free of any preemptive rights. As of the Effective Time, Genzyme shall have
sufficient shares reserved under its stock option plans for the CGI Options
assumed pursuant to Section 1.7
3.4 SEC REPORTS. Genzyme previously has made available to CGI its (a)
Annual Report on Form 10-K for the year ended December 31, 1998 (the "Genzyme
10-K"), as filed with the SEC, (b) all proxy statements relating to Genzyme's
meetings of stockholders held since December 31, 1998 and (c) all other
documents filed by Genzyme with the SEC under the Exchange Act since December
31, 1998 (together with the documents filed by Genzyme with the SEC under the
Exchange Act prior to the Effective Time, the "Genzyme SEC Reports"). As of
their respective dates, such documents complied, and all documents filed by
Genzyme with the SEC under the Exchange Act between the date of this Agreement
and the Closing Date will comply, in all material respects with applicable SEC
requirements and did not, and in the case of documents filed on or after the
date hereof, will not, contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. Since December 31, 1997, Genzyme has timely filed, and between
the date of this Agreement and the Closing Date, will timely file with the SEC
all documents required to be filed under Sections 13, 14 or 15(d) of the
Exchange Act.
3.5 FINANCIAL STATEMENTS. The consolidated financial statements contained
in the Genzyme 10-K and Genzyme's quarterly report on Form 10-Q for the quarter
ended June 30, 1999 (the "Genzyme 10-Q") have been prepared from, and are in
accordance with, the books and records of Genzyme and fairly present the
consolidated financial condition, results of operations and cash flows of
Genzyme and its consolidated subsidiaries as of and for the periods presented
therein, all in accordance with generally accepted accounting principles applied
on a consistent basis, except as otherwise indicated therein and subject, in the
case of the unaudited financial statements included in the Genzyme 10-Q, to
normal year-end and audit adjustments, which in the aggregate are not material,
and the absence of footnote disclosures.
3.6 ABSENCE OF UNDISCLOSED GENZYME LIABILITIES. As at December 31, 1998,
Genzyme had no material liabilities of any nature, whether accrued, absolute,
contingent or otherwise (including, without limitation, liabilities as guarantor
or otherwise with respect to obligations of others or liabilities for taxes due
or then accrued or to become due), required to be reflected or disclosed in the
balance sheet dated December 31, 1998 (or the notes thereto) that were not
adequately reflected or reserved against on such balance sheet. Except as
disclosed in the Genzyme SEC Reports, Genzyme has no such liabilities, other
than liabilities (a) adequately
23
<PAGE>
reflected or reserved against on such balance sheet, (b) reflected in Genzyme's
unaudited consolidated balance sheet (or the notes thereto) dated June 30, 1999,
(c) incurred since June 30, 1999 in the ordinary course of business or (d) that
would not, in the aggregate, have a Genzyme Material Adverse Effect.
3.7 NO MATERIAL ADVERSE CHANGE. Since June 30, 1999, except as disclosed
in the Genzyme SEC Reports, there has not been any event, change or circumstance
which has had a Genzyme Material Adverse Effect.
3.8 ACTIONS AND PROCEEDINGS. Except as set forth in the Genzyme SEC
Reports, there are no actions, suits or claims or legal, administrative or
arbitration proceedings pending or, to the best knowledge of Genzyme, threatened
against Genzyme or any Genzyme Subsidiary that individually or in the aggregate
could reasonably be expected to have a Genzyme Material Adverse Effect or
interfere with Genzyme's ability to consummate the transactions contemplated
hereby. Except as disclosed in the Genzyme SEC Reports, to the best knowledge
of Genzyme, there is no fact, event or circumstance now in existence that
reasonably could be expected to give rise to any suit, action, claim,
investigation or proceeding that, individually or in the aggregate, could
reasonably be expected to have a Genzyme Material Adverse Effect or interfere
with Genzyme's ability to consummate the transactions contemplated hereby.
3.9 NO BREACH. Except for (a) the filing of the Registration Statement
with the SEC, (b) filings required under the Exchange Act, (c) the filing of the
Articles of Merger with the Secretary of The Commonwealth of Massachusetts, (d)
the filing of the Certificate of Merger with the Secretary of State of
Delaware, (e) the filing of a Notification and Report form under the HSR Act and
(f) subject to any approvals or consents required under Genzyme's credit
agreements, the delivery and performance of this Agreement by Genzyme and
consummation by its of the transactions contemplated hereby will not (i) violate
any provision of the charter or by-laws of Genzyme, (ii) violate, conflict with
or result in the breach of any of the terms or conditions of, result in
modification of the effect of, or otherwise give any other contracting party the
right to terminate or accelerate obligations under, or constitute (or with
notice or lapse of time or both constitute) a default under, any material
instrument, contract or other agreement to which Genzyme or a Genzyme Subsidiary
is party or to which any of them or any of their assets or properties is bound
or subject, (iii) violate any law, ordinance or regulation or any order,
judgment, injunction, decree or requirement of any court, arbitrator or
governmental or regulatory body applicable to Genzyme or a Genzyme Subsidiary or
by which any of their assets or properties is bound, (iv) require any filing
with, notice to, or permit, consent or approval of, any governmental or
regulatory body or (v) result in the creation of any lien or other encumbrance
on the assets or properties of Genzyme or a Genzyme Subsidiary, excluding from
the foregoing clauses (ii), (iii), (iv) and (v) violations, breaches and
defaults which, and filings, notices, permits, consents and approvals the
absence of which, in the aggregate, would not have a Genzyme Material Adverse
Effect or interfere with Genzyme's ability to consummate the transactions
contemplated hereby.
3.10 INTELLECTUAL PROPERTY. Genzyme and the Genzyme Subsidiaries own, or
are licensed to use, or otherwise have the right to use, all patents,
trademarks, servicemarks, tradenames, trade secrets, franchises and copyrights,
and all applications for any of the foregoing, and all technology, know-how and
processes necessary for the conduct of their
24
<PAGE>
businesses except (a) to the extent failure to have such ownership or licenses
could not reasonably be expected to have a Genzyme Material Adverse Effect or
(b) as disclosed in the Genzyme SEC Reports.
3.11 PROXY STATEMENT AND REGISTRATION STATEMENT. None of the information
supplied or to be supplied by Genzyme for inclusion in the Registration
Statement will, at the time the Registration Statement is filed with the SEC, at
any time it is amended or supplemented or at the time it becomes effective under
the Securities Act, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading. None of the information supplied or to be
supplied by Genzyme for inclusion or incorporation by reference in the Proxy
Statement/Prospectus will, at the date it is first mailed to holders of CGI
Common Stock or at the time of the CGI Stockholders Meeting, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.
3.12 MERGER SUB
(a) Merger Sub will, when it is incorporated, be duly organized,
validly existing and in good standing as a Massachusetts corporation, with the
requisite corporate power to own, lease and operate the property and carry on
the business as now being conducted by CGI.
(b) All of the capital stock of Merger Sub prior to and at the
Effective Time will be duly authorized, validly issued, fully paid and
nonassessable and owned of record and beneficially by Genzyme.
(c) Merger Sub shall be formed solely for the purpose of engaging in
the transactions contemplated by this Agreement and, prior to the Effective
Time, will not have engaged in any other business activities.
(d) Merger Sub will have the corporate power and authority to enter
into this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby will be duly authorized by all necessary
corporate action on the part of Merger Sub.
(e) Except for (i) the filing of the Articles of Merger with the
Secretary of The Commonwealth of Massachusetts, (ii) the filing of the
Certificate of Merger with the Secretary of State of Delaware and (iii) the
filing of a Notification and Report form under the HSR Act, the performance
of this Agreement by Merger Sub and consummation by its of the transactions
contemplated hereby will not (A) violate any provision of the charter or
by-laws of Merger Sub, (B) violate, conflict with or result in the breach of
any of the terms or conditions of, result in modification of the effect of,
or otherwise give any other contracting party the right to terminate or
accelerate obligations under, or constitute (or with notice or lapse of time
or both constitute) a default under, any material instrument, contract or
other agreement to which Merger Sub is party or to which it or its assets or
properties is bound or subject, (C) violate any law, ordinance or regulation
or any order, judgment, injunction, decree or requirement of any court,
arbitrator or governmental or regulatory body applicable to Merger Sub or by
which any of its assets or
25
<PAGE>
properties is bound, (D) require any filing with, notice to, or permit,
consent or approval of, any governmental or regulatory body or (E) result in
the creation of any lien or other encumbrance on its assets or properties,
excluding from the foregoing clauses (B), (C), (D) and (E) violations,
breaches and defaults which, and filings, notices, permits, consents and
approvals the absence of which, in the aggregate, would not have a material
adverse effect on Merger Sub or interfere with Merger Sub's ability to
consummate the transactions contemplated hereby.
SECTION 4- COVENANTS AND AGREEMENTS
4.1 CONDUCT OF BUSINESS. Except with the prior written consent of Genzyme
and except as otherwise contemplated herein or referred to in Section 4.1 of the
CGI Disclosure Schedule, during the period from the date hereof to the Closing
Date, CGI shall observe the following covenants:
(a) AFFIRMATIVE COVENANTS PENDING CLOSING. CGI shall:
(i) PRESERVATION OF PERSONNEL. Use reasonable commercial
efforts to preserve intact and keep available the services of present employees
of CGI and the CGI Subsidiaries;
(ii) INSURANCE. Use reasonable commercial efforts to keep in
effect casualty, public liability, worker's compensation and other insurance
policies in coverage amounts not less than those in effect at the date of this
Agreement;
(iii) PRESERVATION OF THE BUSINESS; MAINTENANCE OF PROPERTIES,
CONTRACTS. Use reasonable commercial efforts to preserve the business of CGI,
and perform and comply in all material respects with the terms of the contracts
referred to in Section 2.12.
(iv) INTELLECTUAL PROPERTY RIGHTS. Use best efforts to
preserve and protect the Proprietary Rights;
(v) ORDINARY COURSE OF BUSINESS. Operate CGI's business
solely in the ordinary course consistent with past practices;
(vi) CGI PREFERRED STOCK. Keep Genzyme informed as to (A)
ownership of CGI Series B Convertible Preferred Stock and rights to acquire
additional shares of such stock and (B) conversions and redemptions of CGI
Series B Convertible Preferred Stock and third-party sales of CGI Series B
Convertible Preferred Stock;
(vii) CGI OPTIONS AND WARRANTS. Take all actions necessary with
respect to CGI Options and CGI Warrants to effectuate the terms of this
Agreement, provided, however, that Genzyme shall have the right to approve any
agreements to modify terms of the underlying instruments; and
(viii) FDA MATTERS. Subject to the terms of applicable
contracts, notify and consult with Genzyme promptly (A) after receipt of any
material communication from the
26
<PAGE>
FDA and before giving any material submission to the FDA, and (B) prior to the
addition of new clinical trials.
(b) NEGATIVE COVENANTS PENDING CLOSING. CGI shall not without the
prior consent of Genzyme:
(i) DISPOSITION OF ASSETS. Sell or transfer, or mortgage,
pledge, lease or otherwise encumber any of its assets, including its Proprietary
Rights, other than sales or transfers in the ordinary course of business and in
amounts not exceeding $150,000;
(ii) LIABILITIES. Incur any indebtedness for borrowed money,
obligation or liability or enter into any contracts or commitments involving
potential payments to or by CGI or any CGI Subsidiary of $150,000 or more;
(iii) COMPENSATION. Increase the compensation payable to any
officer, director, employee, agent or consultant; or enter into any employment,
severance or other agreement with any officer or director of CGI or a CGI
Subsidiary; or adopt, or increase the benefits under, any employee benefit plan,
except as required by law;
(iv) CAPITAL STOCK. Make any change in the number of shares of
its capital stock authorized, issued or outstanding or grant or accelerate the
exercisability of, any option, warrant or other right to purchase, or convert
any obligation into, shares of its capital stock, or declare or pay any dividend
or other distribution with respect to any shares of its capital stock, or sell
or transfer any shares of its capital stock, or redeem or otherwise repurchase
any shares of its capital stock, except (A) upon the exercise of convertible
securities outstanding on the date of this Agreement and disclosed herein and
(B) redemptions of shares of Series B Convertible Preferred Stock according to
their terms;
(v) CHARTER AND BY-LAWS. Cause, permit or propose any
amendments to the Certificate of Incorporation or By-laws of CGI;
(vi) ACQUISITIONS. Make, or permit to be made, any material
acquisition of property or assets outside the ordinary course of business;
(vii) CAPITAL EXPENDITURES. Authorize any single capital
expenditure in excess of $100,000 or capital expenditures which in the aggregate
exceed $500,000;
(viii) ACCOUNTING POLICIES. Except as may be required as a
result of a change in law or in generally accepted accounting principles, change
any of the accounting practices or principles used by it or restate, or become
obligated to restate, the financial statements included in the CGI 10-K or CGI
10-Q;
(ix) TAX TREATMENT OF MERGER. Take, or permit any of the CGI
Subsidiaries to take, any action that would prevent the Merger from qualifying
as a reorganization within the meaning of Section 368(a) of the Code.
(x) TAXES. Settle or compromise any material federal, state,
local or foreign Tax liability, change annual tax accounting period, change any
method of Tax
27
<PAGE>
accounting, enter into any closing agreement relating to any Tax, surrender any
right to claim a Tax refund, or consent to any extension or waiver of the
limitations period applicable to any Tax claim or assessment;
(xi) LEGAL. Settle or compromise any pending or threatened
suit, action or claim which is material or which relates to the transactions
contemplated hereby;
(xii) EXTRAORDINARY TRANSACTIONS. Adopt a plan of complete or
partial liquidation, dissolution, merger, consolidation, restructuring,
recapitalization or other reorganization of CGI or any of the CGI Subsidiaries
(other than the Merger);
(xiii) PAYMENT OF INDEBTEDNESS. Pay, discharge or satisfy any
claims, liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or satisfaction, in
the ordinary course of business and consistent with past practice, of
liabilities reflected or reserved against in the balance sheet included in the
CGI 10-Q or incurred in the ordinary course of business;
(xiv) WARN ACT. Effectuate a "plant closing" or "mass layoff,"
as those terms are defined in the Worker Adjustment and Retraining Notification
Act of 1988;
(xv) RIGHTS PLAN. Amend, modify or waive any provisions of the
CGI Rights Plan, or take any action to redeem the Rights or render the Rights
inapplicable to any transaction other than the Merger;
(xvi) NEW AGREEMENTS/AMENDMENTS. Enter into or modify, or
permit a CGI Subsidiary to enter into or modify, any license, development,
research or collaboration agreement with any other person or entity other than
modifications contemplated by such agreements; or
(xvii) OBLIGATIONS. Agree or obligate itself to do any of the
foregoing.
(c) CONTROL OF CGI'S BUSINESS. Nothing contained in this Agreement
shall give Genzyme, directly or indirectly, the right to control or direct CGI's
operations prior to the Effective Time. Prior to the Effective Time, CGI shall
exercise, consistent with the terms and conditions of this Agreement, complete
control and supervision over its operations.
4.2 CORPORATE EXAMINATIONS AND INVESTIGATIONS. Prior to the Effective
Time, Genzyme shall be entitled, through its employees and representatives, to
have such access to the assets, properties, business and operations of CGI, as
is reasonably necessary or appropriate in connection with Genzyme's
investigation of CGI with respect to the transactions contemplated hereby. Any
such investigation and examination shall be conducted at reasonable times and
under reasonable circumstances so as to minimize any disruption to or impairment
of CGI's business and CGI shall cooperate fully therein. No investigation by
Genzyme shall diminish or obviate any of the representations, warranties,
covenants or agreements of CGI contained in this Agreement. In order that
Genzyme may have full opportunity to make such investigation, CGI shall furnish
the representatives of Genzyme during such period with all such information and
copies of such documents concerning the affairs of CGI as such representatives
may reasonably
28
<PAGE>
request and cause its officers, employees, consultants, agents, accountants and
attorneys to cooperate fully with such representatives in connection with such
investigation.
4.3 EXPENSES. Prior to the Effective Time, CGI and Genzyme shall bear
their respective expenses incurred in connection with the preparation, execution
and performance of this Agreement and the transactions contemplated hereby,
including without limitation, all fees and expenses of agents, representatives,
counsel and accountants, except that each of Genzyme and CGI shall bear and pay
one-half of the costs and expenses incurred in connection with the filing,
printing and mailing of the Registration Statement and the Prospectus/Proxy
Statement.
4.4 AUTHORIZATION FROM OTHERS. Prior to the Closing Date, the parties
shall use their reasonable commercial efforts to obtain all authorizations,
consents and Permits of others, necessary or desirable in connection with the
consummation of the Merger.
4.5 FURTHER ASSURANCES. Each of the parties shall execute such documents,
further instruments of transfer and assignment and other papers and take such
further actions as may be reasonably required or desirable to carry out the
provisions hereof and the transactions contemplated hereby. Each party shall
use its respective reasonable commercial efforts to take other such actions to
ensure that, to the extent within its control or capable of influence by it, the
transactions contemplated by this Agreement shall be fully carried out in a
timely fashion. Genzyme agrees not to take, or permit any of the Genzyme
Subsidiaries to take, any action that would prevent the Merger from qualifying
as a reorganization within the meaning of Section 368(a) of the Code. Nothing
in this Agreement shall require Genzyme or any Genzyme subsidiary (prior to or
following the Merger) to license, sell, hold separate or otherwise dispose of or
conduct their business in a specified manner, or agree to license, sell, hold
separate or otherwise dispose of or conduct their business in a specified
manner, or permit the license, sale, holding separate or other disposition of,
any assets of Genzyme or any Genzyme Subsidiary, whether as a condition to
obtaining any approval from a governmental entity or any other person or for any
other reason.
4.6 PREPARATION OF DISCLOSURE DOCUMENTS
(a) As soon as practicable following the date of this Agreement, CGI
and Genzyme shall prepare the Proxy Statement/Prospectus. CGI shall, in
cooperation with Genzyme, file the Proxy Statement/Prospectus with the SEC as
its preliminary proxy statement and Genzyme shall, in cooperation with CGI,
prepare and file with the SEC the Registration Statement, in which the Proxy
Statement/Prospectus will be included. Each of CGI and Genzyme shall use
reasonable commercial efforts to have the Registration Statement declared
effective under the Securities Act as promptly as practicable after such filing
and to keep the Registration Statement effective as long as is necessary to
consummate the Merger. CGI shall mail the Proxy Statement/Prospectus to its
stockholders as promptly as practicable after the Registration Statement is
declared effective under the Securities Act and, if necessary, after the Proxy
Statement/Prospectus shall have been so mailed, promptly circulate supplemental
or amended proxy material, and, if required in connection therewith, resolicit
proxies.
(b) (i) CGI shall, as soon as practicable following the date of this
Agreement and the effectiveness of the Registration Statement, duly call, give
notice of, convene and hold a
29
<PAGE>
meeting of its stockholders (the "CGI Stockholders Meeting") for the purpose of
obtaining the required stockholder votes with respect to this Agreement,
including any required votes by holders of the CGI Series B Convertible
Preferred Stock, and any other vote of the CGI Series B Convertible Stock
reasonably requested by Genzyme, (ii) the Board of Directors of CGI, unless
otherwise required pursuant to the applicable fiduciary duties of the Board of
Directors of CGI to the stockholders of CGI (as determined in good faith by the
Board of Directors of CGI based upon the advice of outside counsel), shall
recommend adoption of this Agreement by its stockholders and (iii) CGI shall
take all lawful action to solicit such adoption.
(c) Except as required by law, no amendment or supplement to the
Proxy Statement/Prospectus or the Registration Statement shall be made by
Genzyme or CGI without the approval of the other party (which shall not be
unreasonably withheld). Each party shall advise the other party, promptly after
it receives notice thereof, of the time when the Registration Statement has
become effective or any supplement or amendment has been filed, of the issuance
of any stop order by the SEC, or of any request by the SEC for amendment of the
Proxy Statement/Prospectus or the Registration Statement or comments thereon and
responses thereto or requests by the SEC for additional information.
(d) CGI shall use reasonable efforts to cause to be delivered to
Genzyme a letter from CGI's independent public accountants, dated the date on
which the Registration Statement shall become effective, addressed to CGI and
Genzyme, in form and substance reasonably satisfactory to Genzyme and customary
in scope and substance for comfort letters delivered by independent public
accountants in connection with registration statements similar to the
Registration Statement.
4.7 PUBLIC ANNOUNCEMENTS. Genzyme will consult with CGI, and CGI will
consult with Genzyme, and each will get the approval of the other (which will
not be unreasonably withheld), before issuing any press release or otherwise
making any public statement with respect to the Merger or this Agreement and
will not issue any such press release or make any such public statement prior to
such consultation and approval, except as may be required by law.
4.8 AFFILIATE LETTERS. Prior to the Closing Date, CGI shall identify to
Genzyme all persons who, at the time of the CGI Stockholders Meeting, CGI
believes may be "affiliates" of CGI within the meaning of Rule 145 under the
Securities Act. CGI shall use its best efforts to provide Genzyme with such
information as Genzyme shall reasonably request for purposes of making its own
determination of persons who may be deemed to be affiliates of CGI. CGI shall
use its best efforts to deliver to Genzyme prior to the Closing Date a letter
from each of such affiliates identified by CGI and Genzyme in substantially the
form attached hereto as EXHIBIT B (the "Affiliate Letters").
4.9 NASDAQ EXCHANGE LISTINGS. Prior to the Closing Date, Genzyme shall
file with Nasdaq a Notification for Listing of Additional Shares covering the
shares of GGD Stock to be issued in the Merger. Prior to the Closing Date, CGI
shall take such actions as are necessary so that trading of CGI Common Stock on
Nasdaq ceases prior to the Effective Time.
4.10 NO SOLICITATION. CGI will not, and will not permit any of its
directors, officers, employees, agents or other representatives (including any
financial advisors or attorneys) or
30
<PAGE>
those of any of CGI Subsidiary to (a) solicit, initiate, facilitate or encourage
discussions with any person, other than Genzyme, relating to the possible
acquisition of CGI or any CGI Subsidiary or of all or a material portion of the
assets or capital stock of CGI or any CGI Subsidiary or any merger,
reorganization, consolidation, business combination, share exchange,
recapitalization, dissolution, liquidation or similar transaction involving CGI
or any CGI Subsidiary (an "Alternative Transaction"), (b) participate in any
negotiations regarding, or furnish to any other person information with respect
to, any effort or attempt by any person to do or to seek any Alternative
Transaction or (c) grant any waiver or release under any standstill or similar
agreement. Notwithstanding the foregoing, CGI and the Board of Directors of
CGI shall be permitted to (i) to the extent applicable, comply with Rule
14e-2(a) under the Exchange Act with regard to an Alternative Transaction and
(ii) engage in any discussions or negotiations with, or provide any information
to, a person who makes an unsolicited bona fide written proposal for an
Alternative Transaction with terms which the Board of Directors of CGI
determines in its good faith judgment (after consultation with its financial
advisor) to be more favorable to CGI's stockholders than the Merger and for
which financing, to the extent required, is then committed, if and only to the
extent that, in the case of the actions referred to in clause (ii), (A) CGI is
not in breach of its obligations under this Section 4.10, (B) the Board of
Directors of CGI concludes in good faith, based on the advice of its outside
legal counsel, that the provision of such information or the engaging in such
negotiations or discussions is required by the directors' fiduciary duties in
accordance with Delaware law and (C) prior to providing any information or data
to any person in connection with an Alternative Transaction, the Board of
Directors of CGI receives from such person an executed confidentiality agreement
with terms substantially similar to those contained in the confidentiality
agreement (the "Confidentiality Agreement") dated May 7, 1999 between Genzyme
and CGI, as amended by the amendment thereto dated July 23, 1999 (except as to
standstill provisions, provided that if CGI enters into a confidentiality
agreement without standstill provisions or without standstill provisions that
are substantially similar to those in the Confidentiality Agreement, then
Genzyme shall be relieved of the standstill provisions in the Confidentiality
Agreement). CGI shall notify Genzyme promptly (and, in any case, within one
business day) of any written inquiries, proposals or offers received by, any
information requested from, or any discussions or negotiations sought to be
initiated or continued with, any of its representatives concerning an
Alternative Transaction, indicating, in connection with such notice, the name of
such person and the material terms and conditions of any proposals or offers.
CGI agrees that it will keep Genzyme informed, on a prompt basis (and, in any
case, within one business day), of the status and terms of any such proposals or
offers and the status of any such discussions or negotiations. CGI agrees that
it will immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any parties conducted heretofore with respect
to any proposed Alternative Transaction or similar transaction or arrangement
and will not waive any rights under any confidentiality agreements entered into
with such parties. CGI agrees that it will take the necessary steps to promptly
inform the individuals or entities referred to in the first sentence of this
Section 4.10 of the obligations undertaken in this Section 4.10.
4.11 REGULATORY FILINGS. As soon as is reasonably practicable, CGI and
Genzyme each shall file with the United States Federal Trade Commission (the
"FTC") and the Antitrust Division of the United States Department of Justice
("DOJ") any Notification and Report Forms relating to the Merger required by the
HSR Act, as well as comparable pre-merger notification forms required by the
merger notification and control laws and regulations of any other applicable
jurisdiction, as agreed to by the parties. CGI and Genzyme each shall promptly
(a)
31
<PAGE>
supply the other with any information which may be required in order to make
such filings and (b) supply any additional information which may be requested by
the FTC, the DOJ or the competition or merger control authorities of any other
jurisdiction and which the parties reasonably deem appropriate.
4.12 TERMINATION OF 401(k) PLAN. CGI agrees to terminate its 401(k) Plan
immediately prior to the Closing, unless the Genzyme, in its sole and absolute
discretion, agrees to sponsor and maintain such plan by providing CGI with
written notice of its election at least three (3) days prior to the Closing
Date.
4.13 NOTIFICATION OF CERTAIN MATTERS Between the date hereof and the
Closing Date, CGI shall give prompt notice to Genzyme, and Genzyme shall give
prompt notice to CGI, of (a) the occurrence or non-occurrence of any event or
circumstance the occurrence or non-occurrence of which would be likely to cause
any representation or warranty contained in this Agreement to be untrue or
inaccurate and (b) any failure of CGI or Genzyme, as the case may be, to comply
with or satisfy any covenant, condition or agreement to be complied with or
satisfied by it hereunder.
4.14 REGISTRATION OF CERTAIN SHARES. Promptly after the Effective Time,
Genzyme shall file registration statements on Form S-8 (or any successor or
other appropriate form), with respect to the shares of GGD Stock subject to CGI
Stock Options, and shall use commercially reasonable efforts to maintain the
effectiveness of such registration statement for so long as such options or
purchase rights remain outstanding.
4.15 EMPLOYEE MATTERS.
(a) Genzyme will give individuals who are employed by CGI and the CGI
Subsidiaries immediately prior to the Effective Time and remain as employees of
Genzyme or a Genzyme subsidiary ("Affected Employees") full credit for purposes
of eligibility, vesting, benefit accrual (excluding, however, benefit accrual
under any defined benefit pension plans) and determination of the level of
benefits under any employee benefit plans or arrangements maintained by Genzyme
or any subsidiary of Genzyme for such Affected Employees' service with CGI or
any subsidiary of CGI to the same extent recognized by CGI immediately prior to
the Effective Time.
(b) Genzyme will waive all limitations as to preexisting conditions
exclusions and waiting periods with respect to participation and coverage
requirements applicable to the Affected Employees under any welfare benefit
plans that such employees may be eligible to participate in after the Effective
Time, other than limitations or waiting periods that are already in effect with
respect to such employees and that have not been satisfied as of the Effective
Time under any welfare plan maintained for the Affected Employees immediately
prior to the Effective Time.
(c) As of the Effective Time, Genzyme shall assume and honor in
accordance with their terms all employment, severance and other compensation
agreements and arrangements existing prior to the execution of this Agreement
which are between CGI or any
32
<PAGE>
subsidiary and any director, officer or employee thereof except as otherwise
expressly agreed between Genzyme and such person.
4.16 INDEMNIFICATION
(a) From and after the Effective Time, Genzyme will cause the
Surviving Corporation to fulfill and honor in all respects the obligations, to
the extent legally permissible, of CGI pursuant to the indemnification
agreements listed in Section 4.16 between CGI and certain of its directors and
officers (the "Indemnified Parties") and any indemnification provisions under
CGI's Certificate of Incorporation or By-laws as in effect on the date hereof.
(b) In the event the Surviving Corporation or any of its successors
or assigns (i) consolidates with or merges with any other person and shall not
be the continuing or surviving corporation or entity of such consolidation or
merger or (ii) transfers substantially all of its assets to any person in a
single transaction or a series of transactions, then, and in each such case,
Genzyme will either guarantee the indemnification obligations referred to in
this Section 4.16 or will make or cause to be made proper provision so that the
successors and assigns of the Surviving Corporation assumes the indemnification
obligations described herein for the benefit of the Indemnified Parties.
(c) The provisions of this Section 4.16 are (i) intended to be for
the benefit of, and will be enforceable by, each of the Indemnified Parties and
(ii) in addition to, and not in substitution for, any other rights to
indemnification or contribution that any such person may have by contract or
otherwise.
(d) For a period of six years after the Effective Time, Genzyme shall
use its best efforts to maintain in effect the current level and scope of
directors' and officers' liability insurance policy (a copy of which has
previously been delivered to Genzyme); provided, however, that in no event shall
Genzyme be required to expend in any one year in excess of 150% of the annual
premium currently paid by CGI for such coverage.
4.17 SALE OF ABGNIX STOCK. To the extent requested by Genzyme, prior to
the Closing Date, CGI shall sell a sufficient number of shares of common stock
of Abgenix, Inc. such that, as of the Closing Date, CGI shall own fewer than 20%
of the shares of Abgenix common stock then outstanding.
SECTION 5 - CONDITIONS PRECEDENT TO THE OBLIGATIONS
OF EACH PARTY TO CONSUMMATE THE MERGER
The respective obligations of each party to consummate the Merger shall be
subject to the satisfaction or waiver by mutual consent of the other party, at
or before the Effective Time, of each of the following conditions:
5.1 STOCKHOLDER APPROVAL. CGI shall have obtained the required vote of
holders of CGI Common Stock necessary to adopt this Agreement.
33
<PAGE>
5.2 REGISTRATION STATEMENT. The Registration Statement shall have been
declared effective and shall remain effective and shall not be subject to a stop
order at the Effective Time.
5.3 ABSENCE OF ORDER. No temporary restraining order, preliminary or
permanent injunction or other order issued by a court or other governmental
entity of competent jurisdiction shall be in effect and have the effect of
making the Merger illegal or otherwise prohibiting consummation of the Merger.
5.4 REGULATORY APPROVALS. All approvals from governmental entities shall
have been obtained; provided, however, that the conditions of this Section 5.4
shall not apply to any party whose failure to fulfill its obligations under this
Agreement shall have been the cause of, or shall have resulted in, such failure
to obtain such approval.
5.5 HSR ACT. The waiting period (and any extension thereof) applicable to
the Merger under the HSR Act shall have been terminated or shall have expired.
SECTION 6 - CONDITIONS PRECEDENT TO THE OBLIGATIONS OF
GENZYME TO CONSUMMATE THE MERGER
The obligations of Genzyme to consummate the Merger are subject, to the
fulfillment of the following conditions, any one or more of which may be waived
by Genzyme:
6.1 REPRESENTATIONS, WARRANTIES AND COVENANTS. The representations and
warranties made by CGI in this Agreement (a) shall have been accurate as of the
date of this Agreement and (b) shall be accurate as of the Closing Date as if
made on and as of the Closing Date, except (i) to the extent such
representations and warranties speak as of a specific date which shall be
accurate in all material respects as of such date and (ii) other than with
respect to the representations and warranties contained in Sections 2.3, 2.8(a)
and 2.16 (as it relates to JT), where the failure to be true and correct,
considered in the aggregate, could not reasonably be expected to have a CGI
Material Adverse Effect. The representations and warranties in Sections 2.3,
2.8(a) and 2.16 (as it relates to JT) shall be accurate as of the Closing Date
as if made on and as of the Closing Date. CGI shall have performed and complied
in all material respects with all covenants and agreements required by this
Agreement to be performed or complied with by it on or prior to the Effective
Time. CGI shall have delivered to Genzyme a certificate from its chief
executive officer, dated the Closing Date, to the foregoing effect.
6.2 CORPORATE CERTIFICATES. CGI shall have delivered a copy of the
Certificate of Incorporation of CGI, as in effect immediately prior to the
Closing Date, certified by the Delaware Secretary of State and a certificate, as
of the most recent practicable date, of the Delaware Secretary of State as to
CGI's corporate good standing.
6.3 SECRETARY'S CERTIFICATE. CGI shall have delivered a certificate of
the Secretary of CGI, dated as of the Closing Date, certifying as to (a) the
incumbency of officers of CGI executing documents executed and delivered in
connection herewith, (b) a copy of the By-Laws of CGI, as in effect from the
date this Agreement was approved by the Board of Directors of CGI until the
Closing Date and (c) a copy of the resolutions of the Board of Directors of CGI
authorizing and approving the applicable matters contemplated hereunder.
34
<PAGE>
6.4 AFFILIATE LETTERS. Genzyme shall have received the Affiliate Letters
referred to in Section 4.8.
6.5 PREFERRED STOCK APPROVAL. CGI shall have obtained all necessary
approvals of the terms of the Genzyme Replacement Preferred Stock and purchase
rights from the holders of the CGI Series B Convertible Preferred Stock.
6.6 TAX OPINION. Genzyme shall have received the opinion of Palmer &
Dodge LLP, counsel to Genzyme, to the effect that, on the basis of the facts,
representations and assumptions set forth in such opinion (a) the Merger will be
treated for U.S. Federal income tax purposes as a reorganization within the
meaning of Section 368(a) of the Code and (b) each of CGI and Genzyme will be a
party to that reorganization within the meaning of Section 368(b) of the Code.
The issuance of such opinion shall be conditioned on receipt of representation
letters from each of CGI and Genzyme. The specific provisions of each such
representation letter shall be in form and substance satisfactory to Palmer &
Dodge LLP and Wilson Sonsini Goodrich & Rosati, Professional Corporation, and
each such representation letter shall be dated on or before the date of such
opinion and shall not have been withdrawn or modified in any material respect as
of the Closing Date.
6.7 CERTIFICATE OF MERGER. CGI shall have executed and delivered the
Articles of Merger and Certificate of Merger referred to in Section 1.2.
SECTION 7- CONDITIONS PRECEDENT TO THE OBLIGATION OF
CGI TO CONSUMMATE THE MERGER
The obligation of CGI to consummate the Merger is subject to the
fulfillment of the following conditions, any one or more of which may be waived
by it:
7.1 REPRESENTATIONS, WARRANTIES AND COVENANTS. Except for changes
contemplated by this Agreement, the representations and warranties made by
Genzyme in this Agreement (a) shall have been accurate as of the date of this
Agreement, and (b) shall be accurate as of the Closing Date as if made on and as
of the Closing Date (without giving effect to any materiality or knowledge
qualifications contained therein), except (i) to the extent such representations
and warranties speak as of a specific date which shall be accurate in all
material respects as of such date and (ii) where failure to be true and correct,
considered in the aggregate, could not reasonably be expected to have a Genzyme
Material Adverse Effect. Genzyme shall have performed and complied in all
material respects with all covenants and agreements required by this Agreement
to be performed or complied with by it on or prior to the Effective Time.
Genzyme shall have delivered to CGI a certificate from an authorized officer
dated the Closing Date, to the foregoing effect.
7.2 TAX OPINION. CGI shall have received the opinion of Wilson Sonsini
Goodrich & Rosati, Professional Corporation, counsel to CGI, to the effect that,
on the basis of the facts, representations and assumptions set forth in such
opinion (a) the Merger will be treated for United States Federal income tax
purposes as a reorganization within the meaning of Section 368(a) of the Code
and (b) each of CGI and Genzyme will be a party to that reorganization within
the meaning of Section 368(b) of the Code. The issuance of such opinion
35
<PAGE>
shall be conditioned on receipt of representation letters from each of CGI and
Genzyme. The specific provisions of each such representation letter shall be in
form and substance satisfactory to Wilson Sonsini Goodrich & Rosati,
Professional Corporation, and Palmer & Dodge LLP, and each such representation
letter shall be dated on or before the date of such opinion and shall not have
been withdrawn or modified in any material respect as of the Closing Date.
7.3 MERGER DOCUMENTS. Genzyme shall have executed and delivered the
Articles of Merger and Certificate of Merger referred to in Section 1.2.
SECTION 8 - TERMINATION, AMENDMENT AND WAIVER
8.1 TERMINATION. This Agreement may be terminated at any time prior to
the Effective Time, whether prior to or after adoption by holders of CGI Common
Stock:
(a) by either CGI or Genzyme, by written notice to the other, if the
Effective Time shall not have occurred on or before May 31, 2000; provided,
however, that the right to terminate this Agreement under this Section 8.1(a)
shall not be available to any party whose breach of a representation or warranty
or failure to fulfill any covenant or agreement under this Agreement has been
the cause of or resulted in the failure of the Merger to occur on or before such
date;
(b) by CGI (provided that CGI is not then in material breach of any
representation, warranty, covenant or other agreement contained herein), by
written notice to Genzyme, if there shall have been a material breach of any of
the covenants or agreements or any of the representations or warranties
contained in this Agreement on the part of Genzyme, which breach is either not
cured within twenty (20) days following written notice to Genzyme or by its
nature cannot be cured;
(c) by Genzyme (provided that Genzyme is not then in material breach
of any representation, warranty, covenant or other agreement contained herein),
by written notice to CGI, if there shall have been a material breach of any of
the covenants or agreements or any of the representations or warranties
contained in this Agreement on the part of CGI, which breach is either not cured
within twenty (20) days following written notice to CGI or by its nature cannot
be cured;
(d) by either Genzyme or CGI, by written notice to the other, if any
governmental entity shall have issued any injunction or taken any other action
permanently restraining, enjoining or otherwise prohibiting the consummation of
the Merger and such injunction or other action shall have become final and
non-appealable;
(e) by either Genzyme or CGI, by written notice to the other, if the
stockholders of CGI shall not have adopted this Agreement within sixty (60) days
after (i) the Registration Statement has been declared effective by the SEC or
(ii) the date of the most recent supplemental proxy materials the SEC requires
CGI to distribute to its stockholders; provided, however, that it shall be a
condition precedent to the termination of this Agreement by CGI pursuant to this
Section 8.1(e) that CGI shall have made any payment required by Section 8.3; and
provided, further however, that the right to terminate this Agreement under this
Section
36
<PAGE>
8.1(e) shall not be available to any party whose breach of a representations or
warranty or failure to fulfill any covenant or agreement under this Agreement
has been the cause of or resulted in the failure of stockholder adoption of this
Agreement on or before such date;
(f) by Genzyme, by written notice to CGI, if CGI's Board of Directors
(i) fails to include in the Proxy Statement/Prospectus its recommendation that
CGI's stockholders vote to adopt this Agreement, (ii) withdraws or modifies in a
manner adverse to Genzyme its approval of or its recommendation that its
stockholders vote for the adoption of this Agreement, (iii) adopts resolutions
approving or otherwise authorizes or recommends an Alternative Transaction or
(iv) fails to recommend against a tender or exchange offer in any position taken
pursuant to Rules 14d-9 and 14e-2(a) under the Exchange Act;
(g) by CGI, if as a result of a proposal for an Alternative
Transaction, the Board of Directors of CGI, shall have determined in good faith,
based upon of the advice of outside legal counsel, that the directors are
obligated by their fiduciary duties in accordance with Delaware law to terminate
this Agreement; provided, however, that it shall be a condition precedent to the
termination of this Agreement by CGI pursuant to this Section 8.1(g) that CGI
shall have made the payment required by Section 8.3;
(h) at any time with the written consent of Genzyme and CGI.
8.2 EFFECT OF TERMINATION. If this Agreement is terminated as provided in
Section 8.1, this Agreement shall forthwith become void and have no effect,
without liability on the part of Genzyme and CGI and their respective directors,
officers or stockholders, except that (a) the provisions of this Section 8,
Section 4.3 relating to expenses, and Section 4.7 relating to publicity shall
survive, and (b) no such termination shall relieve any party from liability by
reason of any willful breach by such party of any of its representations,
warranties, covenants or agreements contained in this Agreement.
8.3 TERMINATION FEE
(a) FEE. If this Agreement is terminated by CGI pursuant to Section
8.1(e) or (g), or by Genzyme pursuant to (i) Section 8.1 (e) or (f) or (ii) due
to a breach of Section 4.10, then CGI will make a cash payment to Genzyme of
$15,000,000, provided that no fee shall be owed if this Agreement is terminated
pursuant to 8.1(e) unless at the time of termination there shall have been
announced and not withdrawn an Alternative Transaction. CGI shall pay Genzyme
concurrently with CGI terminating the Agreement and within one business day of
Genzyme terminating the Agreement.
(b) PAYMENTS. Any payments required by this Section 8.3 will be
payable by CGI by wire transfer of immediately available funds to an account
designated by Genzyme.
8.4 AMENDMENT. This Agreement may not be amended except by an instrument
signed by each of the parties hereto; provided, however, that after adoption of
this Agreement by the stockholders of CGI, without the further approval of the
stockholders of CGI, no amendment may be made that (a) alters or changes the
amount or kind of consideration to be received as provided in Section 1.6 or (b)
alters or changes any of the terms and conditions of this
37
<PAGE>
Agreement if such alteration or change would materially adversely affect the
stockholders of CGI.
8.5 WAIVER. At any time prior to the Effective Time, either party hereto
may (a) extend the time for the performance of any of the obligations or other
acts of the other party hereto or (b) waive compliance with any of the
agreements of the other party or any conditions to its own obligations, in each
case only to the extent such obligations, agreements and conditions are intended
for its benefit; provided that any such extension or waiver shall be binding
upon a party only if such extension or waiver is set forth in a writing executed
by such party.
SECTION 9 - MISCELLANEOUS
9.1 NO SURVIVAL. None of the representations and warranties of CGI or
Genzyme contained herein shall survive the Effective Time, and only those
covenants and agreements contained herein that by their terms are to be
performed after the Effective Time shall survive the Effective Time.
9.2 NOTICES. Any notice or other communication required or permitted
hereunder shall be in writing and shall be deemed given when so delivered in
person, by overnight courier, by facsimile transmission (with receipt confirmed
by telephone or by automatic transmission report) or two business days after
being sent by registered or certified mail (postage prepaid, return receipt
requested), as follows:
(a) if to Genzyme, to:
Genzyme Corporation
One Kendall Square
Cambridge, Massachusetts 02139
Attn: Chief Legal Officer
Telephone: (617) 252-7500
Facsimile: (617) 252-7553
with a copy to:
Palmer & Dodge LLP
One Beacon Street
Boston, Massachusetts 02108
Attn: Paul Kinsella
Telephone: (617) 573-0100
Facsimile: (617) 227-4420
38
<PAGE>
(b) if to CGI, to:
Cell Genesys, Inc.
342 Lakeside Drive
Foster City, California 94404
Attn: President
Telephone: (650) 425-4400
Facsimile: (650) 349-5213
with a copy to:
Wilson Sonsini Goodrich & Rosati, Professional Corporation,
650 Page Mill Road
Palo Alto, California 94304
Attn: Barry Taylor
Michael Kennedy
Telephone: (650) 493-9300
Facsimile: (650) 493-6811
Any party may by notice given in accordance with this Section 9.2 to the other
parties designate another address or person for receipt of notices hereunder.
9.3 ENTIRE AGREEMENT. This Agreement contains the entire agreement
between the parties with respect to the Merger and related transactions, and
supersede all prior agreements, written or oral, between the parties with
respect thereto, other than the Confidentiality Agreement, which shall survive
execution of this Agreement, as modified by Section 4.10 hereof.
9.4 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of The Commonwealth of Massachusetts without regard to
its conflict of law provisions, except to the extent that the laws of the State
of Delaware apply to the Merger and the rights of CGI stockholders relative to
the Merger.
9.5 BINDING EFFECT; NO ASSIGNMENT; NO THIRD-PARTY BENEFICIARIES.
(a) This Agreement shall be binding upon and inure to the benefit of
the parties and their respective successors and permitted assigns. This
Agreement is not assignable without the prior written consent of the other party
hereto.
(b) Other than Section 4.16, nothing in this Agreement, express or
implied, is intended to or shall confer upon any person other than Genzyme and
CGI and their respective successors and permitted assigns and right, benefit or
remedy of any nature whatsoever under or by reason of this Agreement.
9.6 SECTION HEADINGS, CONSTRUCTION. The headings of Sections in this
Agreement are provided for convenience only and will not affect its construction
or interpretation. All references to "Section" or "Sections" refer to the
corresponding Section or Sections of this Agreement. All words used in this
Agreement will be construed to be of such gender or number
39
<PAGE>
as the circumstances require. Unless otherwise expressly provided, the word
"including" does not limit the preceding words or terms.
9.7 COUNTERPARTS. This Agreement may be executed in two counterparts,
each of which shall be deemed an original, and both of which together shall
constitute one and the same instrument.
9.8 SEVERABILITY. If any provision of this Agreement is held invalid or
unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement shall remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable. The
parties further agree to replace such invalid or unenforceable provision of this
Agreement with a valid and enforceable provision that will achieve, to the
extent possible, the economic, business and other purposes of such invalid or
unenforceable provision.
9.9 SUBMISSION TO JURISDICTION; WAIVER. Each of CGI and Genzyme
irrevocably agrees that any legal action or proceeding with respect to this
Agreement or for recognition and enforcement of any judgment in respect hereof
brought by the other party hereto or its successors or assigns may be brought
and determined in the courts of The Commonwealth of Massachusetts and each of
CGI and Genzyme hereby irrevocably submits with regard to any action or
proceeding for itself and in respect to its property, generally and
unconditionally, to the nonexclusive jurisdiction of the aforesaid courts. Each
of CGI and Genzyme hereby irrevocably waives, and agrees not to assert, by way
of motion, as a defense, counterclaim or otherwise, in any action or proceeding
with respect to this Agreement, (a) any claim that it is not personally subject
to the jurisdiction of the above-named courts for any reason other than the
failure to lawfully serve process, (b) that it or its property is exempt or
immune from jurisdiction of any such court or from any legal process commenced
in such courts (whether through service of notice, attachment prior to judgment,
attachment in aid of execution of judgment, execution of judgment or otherwise),
and (c) to the fullest extent permitted by applicable law, that (i) the suit,
action or proceeding in any such court is brought in an inconvenient forum, (ii)
the venue of such suit, action or proceeding is improper and (iii) this
Agreement, or the subject matter hereof, may not be enforced in or by such
courts.
9.10 ENFORCEMENT. The parties recognize and agree that if for any reason
any of the provisions of this Agreement are not performed in accordance with
their specific terms or are otherwise breached, immediate and irreparable harm
or injury would be caused for which money damages would not be an adequate
remedy. Accordingly, each party agrees that in addition to other remedies the
other party shall be entitled to an injunction restraining any violation or
threatened violation of the provisions of this Agreement. In the event that any
action shall be brought in equity to enforce the provisions of the Agreement,
neither party will allege, and each party hereby waives the defense, that there
is an adequate remedy at law.
9.11 RULES OF CONSTRUCTION. The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application of any law, regulation, holding or ruling
of construction providing that ambiguities in an agreement or other document
will be construed against the party drafting such agreement or document.
40
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement and Plan of
Merger under seal as of the date first stated above.
GENZYME CORPORATION
By /s/ Peter Wirth
--------------------------------------
Name: Peter Wirth
Title: Executive Vice President
By /s/ Evan M. Lebson
--------------------------------------
Name: Evan M. Lebson
Title: Treasurer
CELL GENESYS, INC.
By /s/ Stephen A. Sherwin
--------------------------------------
Name: Stephen A. Sherwin
Title: President
41
